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PEMMSTLVANIA  STATE  CHAMBER  OF  COMMERCE 

Harrisburg,  Pa. 


STATE  BUDGET  SYSTEMS 


A  Budget  Plan  for  Penns3)lvania 

Penns3?lvania's  Appropriation  Methods 
and  Budget  Systems  in  the  States 


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To    Accompany 

Referendum  Number  Six 

1932 


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GIFT   OF 
Prof >   P,   Orman  Ray 


PENNSYLVANIA  STATE  CHAMBER  OF  COMMERCE 

Harrisburg,  Pa. 


STATE  BUDGET  SYSTEMS 


A  Budget  Plan  for  Penns3)lvania 

Pennsylvania's  Appropriation  MetKods 
and  Budget  Systems  in  the  States 


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To    Accompany 

Referendum  Number  Six 

1923 


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TABLE  OF  CONTENTS 

Page 

Foreword 5 

A  Budget  Plan  for  Pennsylvania — Prepared  by  the  Committee  on 
a  State  Budget — 

Defects  of  Pennsylvania's  appropriation  methods 9 

Reasons  for  recommending  an  executive  budget  system 11 

Budget  law  to  supplement  proposed  constitutional  amend- 
ment      12 

A  budget  plan  for  Pennsylvania 14 

Advantages  of  this  budget  plan 16 

Further  requirements  for  an  effective  budget  system 19 

Pennsylvania's  Appropriation  Methods  and  Budget  Systems  in  the 
States,  by  the  Director  of  the  Research  Bureau — 

Chapter  I 
Methods  of  Appropriating  State  Funds  in  Pennsylvania — 

A  need  for  appraisal  of  the  state's  financial  methods 22 

Lack  of  unity  and  coordination  in  presentation  of  appropria- 
tion bills  and  revenue  measures 26 

Inadequate  information  on  expenditures  and  revenues  avail- 
able to  the  legislator 28 

Ineffective  consideration  of  appropriation  bills  by  the  senate 

and  house  appropriations  committees 33 

Piecemeal,  haphazard  and  hasty  action  upon  appropriation 
and  revenue  measures  by  the  senate  and  house 34 

Governor's  reduction  of  appropriation  bills  to  balance  reve- 
nues and  exi)enditures 35 

Lack  of  adequate  control  over  expenditures 37 

Chapter  II 

The  Budgetary  Movement  in  the  States — 

Definition  of  budget 41 

Adoption  of  budget  acts . .        42 

Four  types  of  state  budgets 43 

The  executive  budget  in  the  states — 

I     Maryland  and  related  group — Utah,  Nevada,  Indiana, 

New  Mexico,  Alabama  and  West  Virginia 45 

II  Virginia  and  related  group — Delaware,  Oklahoma, 
South   Carolina,  Wyoming,   North   Carolina,   Idaho 

and  Florida 49 

III      Illinois   and    related    group — Nebraska,    Utah,    Ohio, 

Idaho  and  Missouri 51 

IV      Massachusetts    55 

V     New  Jersey  and  Kansas  58 

VI  Miscellaneous  group — Arizona,  Colorado,  Indiana, 
Iowa,  Minnesota,  Mississippi,  New  Hampshire  and 
New  Mexico 59 

Administrative  budget  systems — 

I     California    60 

II     Connecticut   62 

III,  IV    Louisiana,  Texas 63-64 

V,  VI     Washington,  West  Virginia   64-65 

VII    Alabama 65 

VIII,  IX    Florida,  Montana    66 

X    Tennessee    67 

XI    Michigan    qs 

XII     Oregon    tjy 


M153064 


XIII     Kentucky   69 

Summary   70 

Administrative-leffislative  budget  systems — 

I     Wisconsin   71 

II     North  Dakota,  South  Dakota,  Vermont  74 

III,  IV     Maine,  North  Carolina,  Georgia  75-76 

V     New  York 76 

Leyislattve  budget  system — 

Arkansas 80 

Summary  of  budget  proqf^dures 80 

Chapter  III 

Operation  of  State  Budget  Systems — Executive  budgets — 

Maryland 84 

Utah 89 

Nevada 89 

Virginia    90 

South  Carolina   92 

Oklahoma   93 

Illinois    94 

Nebraska    95 

Massachusetts   96 

New  Jersey  100 

Kansas   103 

Arizona,  Colorado  104 

Iowa,  Minnesota 105 

New  Mexico   »  106 

Ohio    106 

• 

Administrative  budgets — 

California    107 

Connecticut,  West  Virginia   108 

Montana,  Tennessee  109 

Michigan    110 

Administrative-legislative  budgets — 

Wisconsin    Ill 

North  Dakota,  South  Dakota 113 

Maine,  Georgia 114 

New  York   114 

Legislative  budget  system — 

Arkansas   116 

Summary  of  operating  results 116 

Tables 

I     Appi-opriations  by  Pennsylvania  Legislature,  1901-1921   24 

II     Statement  of  Cash  Receipts  and  Disbursements  of  General 
Fund,   Commonwealth   of   Pennsylvania,   Dec.   1,   1915   to 

May  31,  1921 25 

III     Summary  statement  of  Cash  Receipts — By  Funds  Common- 
wealth of  Pennsylvania,  Dec.  1,  1915  to  May  31,  1921 39 

IV     Classified  List  of  State  Budget  Systems 44 

V    Personnel  of  State  Budget  Boards  46-47 

Appendix 

References  to  state  budget  laws  and  amendments 119 


FOREWORD 

To  Members  of  the  Pennsylvania 
State  Chamber  of  Cmnmerce: 

The  two  outstanding  public  questions  in  Pennsylvania, 
today  are  the  systematization  of  state  finances  and  the  reorgan- 
ization of  state  administration.  Representing  organized  business 
in  Pennsylvania  the  State  Chamber  is  vitally  interested  in  mak- 
ing both  of  these  constructive  reforms  effective  as  quickly  as  pos- 
sible. Experience  indicates  that  there  can  be  no  effective 
budget  system  without  a  unified  and  responsible  state  govern- 
ment. . 

Sentiment  for  a  state  budget  system  was  largely  inspired 
and  popularized  by  the  efforts  of  the  State  Chamber.  Early  in 
1921,  through  its  Research  Bureau,  the  Chamber  began  a  scien- 
tific appraisal  of  Pennsylvania's  appropriation  methods  and 
the  budget  systems  of  other  states.  At  its  third  annual  meet- 
ing, October  10-11,  1921,  the  State  Chamber  adopted  this  res- 
olution : 

WHEREAS,  It  is  now  generally  conceded  that  a  budget  system 
is  indispensable  to  the  systematic  and  intelligent  handling  of 
governmental  as  well  as  business  finances;   and 

WHEIREAS,  The  Federal  Government  and  all  of  the  states,  ex- 
cept Pennsylvania  and  one  other  state,  have  followed  approved 
business  practice  by  installing  a  permanent  budget  procedure; 
therefore  be  it 

RESOLVED,  That  the  Pennsylvania  State  Chamber  of  Com- 
merce strongly  urge  the  installation  of  a  budget  system  in  our 
state  government  to  expedite  the  creation  of  a  balanced  rela- 
tionship between  revenues  and  expenditures,  and  the  adoption 
of  a  work  program  through  correlated  and  proportional  appro- 
priations to  state  services  and  institutions. 

This  action  received  extensive  publicity  and  gave  rise  to  a 
wide-spread  demand  for  a  state  budget  system  in  Pennsylvania. 
Owing  to  its  effective  campaign  for  systematic  control  of 
state  finances,  the  State  Chamber  was  officially  recognized  in 
the  Governor's  appointments  to  the  Commission  on  Reorganiz- 
ation of  State  Government.     The  Chamber's  representative  is 


participating  in  the  Commission's  deliberations  to  devise  plans 
for  the  greater  application  of  business  methods  to  state  admin- 
istration. And  it  was  the  State  Chamber's  privilege  to  re- 
ceive and  publish  the  six  preliminary  recommendations  of  the 
Reorganization  Commission,  first  released  by  Chairman  Wood- 
ward at  the  Chamber's  conference  of  state  affairs  committees, 
representing  the  local  chambers,  on  April  6,  1922. 

Everybody  is  for  a  state  budget,  but  there  is  no  such  unan- 
imity on  the  type  of  budgetary  control  desired.  To  this  prob- 
lem the  Chamber's  committee  on  a  state  budget  has  given  long 
and  earnest  study,  aided  by  the  investigations  of  the  Chamber's 
Research  Director.  On  the  basis  of  this  study  the  committee 
now  reports  an  executive  budget  plan  for  Pennsylvania,  adapted 
to  local  conditions  and  embodying  the  practices  found  most 
successful  under*  existing  budget  systems.  This  proposal  to 
establish  an  executive  budget  by  legislation,  pending  the  adop- 
tion of  a  constitutional  amendment,  coincides  with  a  prelimin- 
ary recommendation  of  the  Reorganization  Commission. 

The  budget  committee's  report  and  the  supporting  research 
study  are  now  published  to  give  the  Chamber's  membership 
reliable  data  upon  Pennsylvania's  appropriation  methods  and 
the  budget  systems  of  forty-six  states.  With  this  information 
at  hand  the  Chamber's  Board  of  Directors  have  thought  it  op- 
portune to  authorize  Referendum  No.  6  based  upon  the  recom- 
mendations of  the  committee  on  a  state  budget. 

Alba  B.  Johnson, 

President. 


A  BUDGET  PLAN  FOR 
PENNSYLVANIA 


Prepared  by   tKe 

COMMITTEE  ON  STATE  BUDGET 

Penns>)lvania  State  Chamber  of  Commerce 


Submitted  to 

TKe  CKamber's  Board  of  Directors 

June  8,    1922 


MEMBERS  OF  COMMITTEE  ON  A  STATE  BUDGET 

OP  THE 

PENNSYLVANIA  STATE  CHAMBER  OF  COMMERCE 

Hamilton    Stewart,    Vice-President,    Harbison-Walker    Re- 
fractories Company,  Pittsburgh,  Chairman. 

J.  E.  B.  Cunningham,  Attorney,  Harrisburg. 

Franklin   S.   Edmonds,  Attorney   and  Member   of  House, 
Legislature  of  1921,  Philadelphia. 

Spencer  C.  Gilbert,  Member  of  Henry  Gilbert  &  Son,  Har- 
risburg. 

E.  E.  Knobloch,  Treasurer,  Union  Iron  Works,  Erie. 

George  D.  Ogden,  Traffic  Manager,  Central  Region,  Penn- 
sylvania System,  Pittsburgh. 

John  Uhl,  Vice-President,  Penn  Tobacco  Company,  Wilkes- 
Barre. 


8 


5    i 

J     ,   5  '   >   1 


3    1 


REPORT  OF  THE  STATE  CHAMBER'S  COMMITTEE  ON 

A  STATE  BUDGET  TO  THE  CHAMBER'S 

BOARD  OF  DIRECTORS 

The  business,  men  of  Pennsylvania,  contributing  thre^- 
f ourths  of  the  state  government 's  tax  receipts,  view  with  alarm 

(1)  the  steady  increase  in  annual  appropriations  from 
$13,000,000  twenty  years  ago,  to  $31,000,000  ten  years  ago, 
and  $58,000,000  in  the  current  biennium; 

(2)  the  growing  habit  of  the  state  to  live  beyond  its 
income,  as  illustrated  by  the  chronic  deficiency  appropriations 
of  the  past  twenty  years  and  the  estimated  $30,000,000  excess 
of  appropriation  liabilities  over  income  in  the  current  biennium ; 
and 

(3)  the  lack  of  unified  financial  planning  and  control 
responsible  for  several  outstanding  defects  in  the  state's  appro- 
priation methods. 

Defects  of  Pennsylvania's  Appropriation  Methods 

These  major  shortcomings  will  be  noted  briefly  here,  for 
they  are  fully  set  forth  in  Chapter  I  of  the  accompanying  re- 
search report. 

(1)  Little  is  done  to  focus  the  attention  of  the  legislator 
and  public  upon  the  state's  financial  and  work  program  as  a 
whole.  Neither  constitution  nor  statute  affectively  centralizes 
responsibility  in  any  official  or  board  for  a  study  of  state  needs 
and  submission  to  the  legislature  of  a  complete  expenditure  and 
revenue  program.  Besides  the  general  appropriation  bill  for- 
mulated by  the  house  appropriations  committee,  there  were  over 
600  separate  appropriation  measures  introduced  by  individual 
legislators  in  1921,  450  of  which  were  passesd  and  sent  to  the 
governor. 

(2)  Financial  information  available  to  the  legislator  is 
very  inadequate.    He  lacks  summary  and  detailed  data  compar- 


ing  the  general  and  special  expenditures  proposed  with  the 
costs  for  the  current  and  two  preceding  fiscal  years,  classified 
by  organization  units,  character,  functions  and  objects.  He 
has  no  accurate  data  facilitating  a  comparison  of  specific  state 
service  on  the  basis  of  utility,  efficiency  and  operating  cost. 
No  official  estimate  or  analysis  of  available  or  proposed  state 
revenues  accompanies  the  general  appropriation  bill.  No  bal- 
anced statement  of  general  and  special  funds  is  placed  in  the 
legislator's  hands. 

(3)  Owing  to  the  piece-meal  presentation  of  appropria- 
tion requests  and  the  delay  in  evolving  a  coordinate  revenue 
program,  members  of  the  appropriations  committees  themselves 
are  unable  to  get  a  birds-eye  view  of  the  state's  finances.  Few 
members  of  these  committees,  except  the  chairmen  and  their 
clerks,  have  a  thorough  grasp  of  the  state's  finances  and  are 
able  to  balance  appropriation  requests  against  each  other  and 
the  probable  income. 

(4)  In  the  last  congested  weeks  of  the  session  a  mass  of 
uncorrelated  appropriation  bills  is  reported  out  to  the  houses 
for  action. 

As  a  rule  the  legislator  looks  out  for  the  individual  bills 
he  has  sponsored  and  takes  the  others  on  faith — accepts  the 
committee  recommendations.  This  situation  inspires  log-rolling 
and  trading  of  votes  among  members  to  get  funds  for  their 
local  institutions  or  political  friends — a  process  not  conducive 
\  to  economy  or  aid  to  the  most  worthy.  The  legislator  loses 
sight  of  available  state  revenues,  the  importance  of  his  project 
in  the  state's  work  program  as  a  whole,  and  the  relative  util- 
ity and  efficiency  of  various  services  performed  by  public  and 
semi-public  agencies. 

Generally  bills  are  jammed  through  the  houses  by  perfunc- 
tory roll  calls,  most  of  them  in  the  few  days  before  adjourn- 
ment. 

(5)  The  legislature  adjourns  without  knowing  by  how 
much  the  total  appropriations  exceed  probable  income,  and 
passes  to  the  governor  the  task  of  acting  on  several  hundred 
appropriation  bills  to  balance  expenditures  and  revenues  dur- 
ing the  biennium. 

10 


Hence  the  governor  does  his  thinking  about  the  state's  fin- 
ances after,  instead  of  before,  legislative  adjournment. 

(6)  There  is  no  effective  check  upon  the  evil  of  defici- 
ency appropriations. 

(7)  Too  much  discretion  is  permitted  in  the  expenditure 
of  contingent  funds. 

(8)  ** Ear-marked"  funds  complicate  the  preparation  of 
a  balance  sheet,  remove  certain  state  agencies  from  strict  bud- 
getary control,  impoverish  the  general  fund,  and  thereby  force 
some  state  agencies  and  institutions  to  borrow  money  while 
special  funds  are  tied  up  in  state  depositaries  at  a  low  rate  of 
interest. 

Reasons  for  Eecommending  an  Executive  Budget  System 

Our  own  observations  and  the  facts  established  by  a 
thorough  study  of  budget  systems  in  other  states,  made  for 
us  by  the  Chamber's  Research  Director,  prompt  the  recommend- 
ation of  an  executive  budget  system  for  Pennsylvania  to  intro- 
duce more  business-like  methods  into  state  finances. 

This  type  predominates  in  over  half  of  the  forty-six  states 
now  operating  under  a  budgetary  procedure  of  one  kind  or 
another,  especially  in  those  states  comparable  to  Pennsylvania 
in  size,  population  and  wealth.  Twenty-four  states  now 
have  an  executive  budget  system;  thirteen,  an  administrative 
budget  system;  eight,  a  mixed  administrative-legislative  bud- 
get system;  and  one,  a  legislative  budget  system. 

Expert  opinion  of  accountants,  research  agencies  and  state 
efficiency-  commissions  is  in  favor  of  the  executive  budget. 
Among  its  prominent  advocates  are  the  Institute  for  Govern- 
ment Research,  Washington,  D.  C. ;  the  Government  Research 
Conference;  the  Institute  for  Public  Service,  New  York  City; 
the  New  York  Bureau  of  Municipal  Research;  the  New  York 
State  Reconstruction  Commission;  the  New  York  State  Associa- 
tion ;  the  Massachusetts  Commission  on  State  Administration  and 
Expenditures ;  the  Philadelphia  Bureau  of  Municipal  Research ; 
the  Ohio  Institute  for  Public  Efficiency;  the  Detroit  Bureau  of 
Governmental  Research;  and  Griff enhagen  and  Associates,  Ltd., 
efficiency  engineers  and  accountants,  Chicago. 

11 


Through  unified  financial  planning  and  control  the  execu- 
tive budget  has  shown  superior  working  advantages  over  the 
other  types.  A  budget  board  weakens  the  governor's  admin- 
istrative powers,  divides  financial  responsibility,  and  encour- 
ages padding  of  estimates  by  administrative  officials  on  the 
board. 

By  making  Ijie  governor  responsible  for  the  formulation 
and  execution  of  the  financial  and  work  program,  he  becomes 
in  fact  as  well  as  in  theory  the  directing  head  of  the  state's 
business  affairs.  This  is  his  legitimate  function.  He  is  the 
state's  outstanding  public  officer  and  represents  the  whole  Com- 
monwealth, not  a  single  department  or  legislative  district.  ''As 
the  chief  executive  he  is  in  the  best  possible  stratgetic  position 
for  securing  the  information  essential  to  the  preparation  of  the 
budget,  and  for  enforcing  the  restrictions  inherent  in  a  thor- 
ough-going budget  system.  He  is,  moreover,  the  one  man  whom 
the  citizens  hold  responsible  for  what  the  state  does.  He  is 
the  one  man  to  whom  the  citizens  look  for  initiative  in  state 
matters. ' ' 

Integration  and  consolidation  of  Pennsylvania's  state  ad- 
ministration is  sufficiently  accomplished  or  under  way  to  make 
possible  the  preparation  and  execution  of  a  financial  and  work 
program  by  the  governor.  And  lodging  financial  responsibility 
in  the  governor  compels  his  attention  to  the  problem  of  fur- 
ther reorganization  and  tightening  of  state  administration. 

Finally,  in  vetoing  or  reducing  items  of  legislative  appro- 
priation, the  governor  of  Pennsylvania  is  forced  to  improvise 
a  work  program  for  the  state  at  the  eleventh  hour.  If  he  ought 
to  be  invested  with  the  power  to  veto  and  reduce  items  of 
appropriaation  after  the  legislature  adjourns,  when  his  word 
is  final,  should  he  not  be  fully  empowered  to  prepare  xn  ad- 
vance the  state's  financial  program  for  legislative  review  and 
action? 

Budget  Luw  to  Supplement  Proposed   Constitutional 

Amendment 

The  budget  amendment  prepared  by  the  recent  Commis- 
sion   on    Constitutional    Amendment    and    Revision    generally 

12 


meets  the  basic  requirements  for  systematization  of  state  fin- 
ances.    It  provides: 


( i 


i( 


Article  III 
Budget  and  Appropriation  Bills. 


"Section  12.  The  governor  shall  submit  to  the  general  assem- 
bly a  budget  on  or  before  March  1  of  each  year  in  which  it  shall 
be  in  regular  session.  The  budget  shall  contain  a  complete  plan 
of  proposed  appropriations  and  complete  estimates  of  the  reven- 
ues and  funds  available  for  appropriation  for  the  two  ensuing 
fiscal  years,  Including  appropriations  for  charitable,  educationnl 
and  benevolent  purposes.  In  submitting  proposals  for  appropri- 
ations to  charitable,  educational  or  benevolent  institutions  not 
under  the  absolute  control  of  the  state  government,  the  governor 
shall  at  the  same  time  submit  a  plan  of  distribution  among  the 
classes  of  institutions  to  be  benefited. 

"When  the  governor  presents  the  budget  to  the  house  of  repre- 
sentatives, he  shall  submit  a  general  appropriation  bill  contain- 
ing the  proposed  appropriations  for  the  fiscal  years  covered  by  the 
budget' and  may  also  submit  any  bill  embodying  recommendations 
as  to  sources  of  revenue. 

"The  presiding  oflicer  of  the  house  of  representatives  shall 
immediately  cause  such  bills  to  be  introduced. 

"The  general  assembly  may  increase,  decrease,  strike  out  or 
otherwise  alter  any  item  in  the  general  appropriation  bill,  or 
may  add  new  items  thereto. 

"Until  the  general  appropriation  law  has  been  enacted  neither 
house  shall  consider  an  apipropriation  bill  other  than  the  general 
appropriation  bill  unless  the  appropriation  shall  be  solely  for 
the  immediate  needs  of  the  general  assembly  or  unless  the  gov-, 
ernor  shall  request  the  general  assembly  to  act  upon  the  bill 
in  advance  of  the  general  appropriation  bill. 

"After  the  general  appropriation  law  has  been  enacted  no  ap- 
propriation shall  be  made  for  any  purpose,  object  or  item  in- 
cluded therein  or  in  the  general  appropriation  bill  as  submitted 
by  the  governor,  unless  the  governor  shall  request  the  general 
assembly  to  pass  a  bill  making  such  appropriation. 

"The  general  assembly  shall  not  finally  adjourn  for  ten  days 
after  the  general  appropriation  bill  has  been  presented  to  the 
governor." 

But  this  budget  system  established  by  a  constitutional 
amendment— adopted  by  the  legislatures  of  1923  and  1925,  and 
ratified  by  popular  vote  in  1926^ — would  not  function  until  the 

13 


legislative  session  of  1927.  Meanwhile,  the  state's  finances  sorely 
need  the  systematic  control  inherent  in  budgetary  procedure." 
An  executive  budget  law  enacted  in  1923  would  meet  this  need, 
and  also  supply  actual  experience  in  budget-making  as  a 
basis  for  the  administrative  practice  and  supplementary  legis- 
lation essential  to  full  operation  of  the  budget  amendment. 

Of  course,  a  budget  system  established  by  constitutional 
amendment  has  greater  permanence  than  one  established  by 
statute.  A  budget  amendment  binds  subsequent  legislatures 
and  governors  and  is  repealed  with  great  difficulty;  while  a 
Imdget  law  is  easily  nullified  by  a  succeeding  legislature. 

However,  it  is  likely  the  current  demand  for  ordered  state 
finances  would  safeguard  a  budget  law  passed  in  1923  against 
early  repeal.  There  is  abundant  evidence  that  public  senti- 
ment can  give  real  security  to  a  statutory  budget  procedure. 
Of  the  forty-six  states  now  operating  under  a  budget  system  only 
three  have  incorporated  it  in  their  constitution.  Yet  no  state 
has  repealed  its  budget  law  except  to  pass  one  that  is  more  ef- 
fective. 

A  Budget  Plan  for  Pennsylvania 

Pending  the  adoption  of  a  budget  amendment  to  the  con- 
stitution we  recommend  an  executive  budget  law,  as  outlined 
below  based  upon  local  needs  and  the  experience  of  forty-six 
states  now  operating  under  a  permanent  budgetary  procedure. 

(1)  All  departments,  agencies  and  institutions  receiving 
state  funds  shall  transmit  their  appropriation  requests,  includ- 
ing proposed  expenditures  of  ear-marked  funds,  to  the  governor 
by  November  1  of  each  even-numbered  year,  on  estimate  blanks 
prepared  and  submitted  by  him. 

These  blanks  shall  be  in  such  form  and  call  for  such  inform- 
ation as  the  governor  may  require.  On  such  blanks  shall  be 
spaces  to  show,  among  other  things,  (a)  information  as  to  the 
revenues  and  expenditures  for  the  last  two  completed  fiscal 
years,  (b)  the  appropriations  made  by  the  previous  general  as- 
sembly, (c)  the  expenditures  therefrom,  (d)  an  estimate  of 
the  amount  thereof  required  to  complete  the  fiscal  period,  (e) 
any  encumbrances  upon  such  appropriations,   (f)   the  amounts 

14 


unencumbered  and  which  will  be  unexpended,  (g)  an  estimate 
of  the  revenues  and  expenditures  for  the  current  fiscal  year, 
(h)  and  an  estimate  of  the  revenues  to  be  received  and  appro- 
priations required  for  the  next  two  fiscal  years. 

The  governor  with  the  aid  of  a  budget  director  and  staff 
will  then  compile  and  collate  these  requests  and  proposals,  com- 
paring them  with  past  and  current  expenditures,  present  needs 
and  available  income. 

Such  budget  director  will  be  appointed  by  the  governor 
with  the  advice  and  consent  of  the  senate  for  a  term  of  six 
years. 

(2)  From  the  auditor  general  the  governor  will  receive 
annually,  by  December  15,  a  statement  of  receipts  and  expend- 
itures during  the  fiscal  year  last  ended,  a  statement  of  estimated 
revenue  in  the  current  and  the  next  succeeding  fiscal  years,  a 
balance  sheet  of  the  state's  finances,  a  statement  of  unexpended 
balances  from  previous  appropriations  of  the  legislature,  a  gen- 
eral and  special  fund  statement,  and  a  statement  of  the  state 
debt. 

(3)  The  governor  will  review  and  revise  all  appropria- 
tion requests,  holding  joint  public  hearings  in  February  of 
each  odd-numbered  year  with  the  chairmen  of  the  appropria- 
tions and  ways  and  means  committees  of  the  house  and  senate, 
the  state  treasurer  and  the  auditor  general. 

The  governor  may  delegate  the  budget  director  to  hold  such 
hearings. 

(4)  The  executive  budget  estimates  transmitted  to  the 
legislature  by  March  1  of  each  odd-numbered  year  will  show 
in  summary  and  itemized  form  the  amounts  requested  by  all 
spending  agencies,  classified  by  organization  units,  capital, 
maintenance  and  operation  purposes ;  the  funds  from  whch  such 
requests  are  payable;  the  governor's  recommendations  thereon; 
his  explanation  of  increases  or  decreases  as  compared  with  pre- 
vious grants;  the  amounts  spent  by  the  several  agencies  in 
the  last  two  completed  fiscal  years;  and  the  estimated  expend- 
itures in  the  current  fiscal  year. 

(5)  Accompanying  the  governor's  expenditure  recom- 
mendations submitted  to  the  legislature  will  be  a  statement  of 

15 


revenues  in  the  two  last  completed  fiscal  years,  a  statement  of 
estimated  income  to  balance  expenditures  proposed,  a  balance 
sheet  of  state  finances,  a  fund  statement  and  a  debt  statement. 

(6)  With  the  budget  estimates  the  governor  will  also 
submit  a  general  appropriatjion  bill  covering  the  needs  of  all 
state  departments,  interest  on  the  public  debt,  and  the  public 
schools,  together  with  individual  bills  for  all  special  appropri- 
ations as  required  b/  the  constitution.  All  appropriations,  ex- 
cept for  construction  under  way  or  where  contracts  have  been 
let,  shall  lapse  at  the  end  of  the  fiscal  period  for  which  made. 

All  appropriation  items  shall  be  classified  by  organization 
units,  capital,  maintenance,  and  operation  (personal  services 
and  commodities)  purposes. 

Appropriations  to  each  executive  department  will  carry 
for  legislative  approval  a  schedule  of  salaries  and  a  plan  of 
expending  special  funds  credited  to  each  department. 

Appropriations  to  the  Board  of  Commissioners  of  Public 
Grounds  and  Buildings  and  to  the  Department  of  Public  Print- ' 
ing  and  Binding  will  carry  for  legislative  approval  schedules 
of  funds  available  to  each  state  agency  for  service,  materials, 
supplies  and  printing  furnished  by  these  departments. 

(7)  Beginning  not  later  than  March  15,  the  appropria- 
tions committees  of  the  house  and  senate  will  meet  jointly  for 
consideration  of,  and  public  hearings  upon,  the  governor's  fin- 
ancial program. 

(8)  In  the  exercise  of  the  power  granted  by  the  consti- 
tution, the  legislature  may  increase,  decrease,  add  to  or  strike 
out  any  items  in  the  executive  budget  bills,  and  may  permit  the 
introduction,  consideration  and  passage  of  any  additional  ap- 
propriation bills. 

(9)  All  budget  information  collected  by  the  budget  di- 
rector shall  be  permanently  preserved  in  the  governor's  office 
and  placed  at  the  disposal  of  each  incoming  executive. 

Advantages  of  this  Budget  Plan 

Let  us  consider  briefly  the  significance  of  these  budget  pro- 
visions. 

To  pass  upon  the  appropriation  requests,  intimate  knowl- 
edge of  each  organization  unit — its  needs,  efficiency,  and  oper- 

18 


ating  methods — is  required  by  the  governor's  staff.  Hence  a 
budget  commissioner  appointed  by  the  governor  is  provided  for 
continuous  study  of  the  state's  finances.  Such  official  will  also 
be  in  a  strategic  position  to  observe  opportunities  for  improve- 
ment in  administrative  practice  and  organization. 

The  auditor  general  is  a  check  both  upon  the  governor  and 
legislature  and  his  record  of  the  state's  assets  and  liabilities 
is  authoritative  and  complete.  Therefore,  his  full  cooperation 
in  budget-making  is  absolutely  indispensable. 

Public  hearings  by  the  executive  on  the  estimates  will  have 
a  great  publicity  value,  focus  the  voter's  attention  upon  the 
state's  financial  conditions  and  problems,  and  bring  the  gov- 
ernor, the  state's  fiscal  officers  and  the  legislature  into  closer 
working  relations. 

Preparation  of  the  executive  budget  estimates  will  require 
the  governor  to  do  his  thinking  about  state  finances  before  the 
legislature  adjourns;  provide  a  unified  financial  and  work  pro- 
gram for  consideration  by  the  public  and  legislature;  and  fur- 
nish legislators  and  committees  with  the  requisite  financial  in- 
formation for  intelligent  discussion  of  the  state's  needs  and  rev- 
enues. 

Executive  budget  bills  will  avoid  the  danger  of  having  the 
budget  recommendations  regarded  merely  as  an  administrative 
report;  compel  legislative  action  upon  a  comprehensive  financial 
plan;  and  thus  increase  legislative  responsibility  for  state  ex- 
penditures, by  reducing  the  margin  between  appropriations 
passed  and  those  finally  approved  by  the  governor. 

So  long  as  the  present  constitution  is  unamended,  individ- 
ual appropriation  bills  are  necessary  for  items  not  properly 
included  in  the  general  appropriation  bill.  However,  the  unity 
of  the  appropriation  program  can  be  preserved  by  inserting  all 
appropriate  items  in  the  general  bill— a  practice  not  now  fol- 
lowed— and  authorizing  the  governor  to  submit  individual  bills 
for  all  special  grants. 

Under  this  practice  log-rolling  will  become  increasingly  dif- 
ficult, since  every  additional  and  questionable  expenditure  will 
be  carefully  scrutinized  for  its  effect  upon  the  executive  pro- 
gram of  financing  bona  fide  state  needs. 

17 


Similarly,  deficiency  bills  will  decrease  in  number  and 
amount.  A  well  planned  work  program  should  tend  to  elimin- 
ate the  necessity  of  supplementary  grants  except  for  emergency 
purposes.  And  more  systematic  appropriations  and  controlling 
accounts  will  disclose  any  evidences  of  waste,  incompetence  or 
irregularity  responsible  for  deficiencies  incurred.  Besides,  a 
governor  committed  io  a  balanced  program  of  expenditures  and 
revenue  will  exert  strong  and  constant  pressure  upon  depart- 
ments and  institutions  to  live  within  their  allotted  income. 
Failure  to  do  so  will  publicly  discredit  the  executive's  capacity 
for  financial  planning  and  control. 

Headings  of  the  executive  appropriation  bills,  though  less 
detailed,  will  be  uniform  with  the  classification  of  estimates. 
Such  classified  headings  will  eventually  be  standardized  for  all 
estimates,  appropriations  and  controlling  accounts.  This  stand- 
ardization will  facilitate  a  fair  comparison  of  the  operating  costs 
and  efficiency  of  state  departments,  with  respect  to  equipment, 
commodities  and  personal  service;  narrowly  restrict  the  use  of 
contingent  funds;  and  subject  the  expenditure  of  special  and 
general  funds  to  a  similar  measure  of  budgetary  control. 

Joint  meetings  of  the  house  and  senate  appropriations 
committees  will  attract  attention,  conserve  time  and  hasten 
agreement  of  the  two  branches  upon  a  financial  program,  thus 
eliminating  the  confusion  and  error  incident  to  last  minute 
amendments  by  one  house  or  the  other. 

The  constitution  prevents  a  limitation  upon  legislative 
power  to  increase  executive  budget  recommendations,  and  with 
the  Pennsylvania  governor's  veto  power  such  restriction  is 
hardly  necessary. 

However,  some  arrangement  must  eventually  be  made 
whereby  the  governor's  budget  bills  shall  be  given  a  preferred 
legislative  status  in  the  manner  contemplated  by  the  budget 
amendment.  Without  a  definite  guarantee  of  early  legislative 
action  upon  the  executive  budget  bills,  the  danger  of  hasty  en- 
actment of  appropriation  acts  in  the  closing  days  of  the  session 
is  not  fully  removed.  But,  under  the  proposed  budget  law  such 
enactment  would  be  tempered  by  complete  financial  informa- 
tion not  now  available  to  the  legislature. 

18 


Unless  the  incoming  governor  has  access  to  the  budgetary 
information  collected  by  his  predecessor,  he  will  be  greatly 
handicapped  in  formulating  a  financial  program  and  will  treat 
with  scant  respect  such  recommendations  as  the  retiring  exec- 
utive may  make. 

Further  Requirements  for  an  Effective  Budget  System 

For  the  most  effective  operation  of  a  budget  certain  sup- 
plementary legislation  is  desirable. 

Adoption  of  the  calendar  year  for  all  state  business  is  nec- 
essary to  eliminate  the  confusion  now  incident  to  the  differing 
financial,  appropriation  and  tax  years;  simplify  the  state's  book- 
keeping methods;  and  increase  the  reliability  of  fiscal  estimates 
fqr  budget  making  purposes. 

Merging  of  ''ear-marked"  funds  with  the  general  fund  is 
needed  to  prepare  a  balance  sheet  of  state  finances,  to  subject 
all  departments  to  budgetary  control,  and  to  simplify  the  prob- 
lem of  maintaining  adequate  cash  balances  without  tying  up 
unusually  large  amounts  of  money  or  making  temporary  loans. 
In  lieu  of  abolition  such  special  funds  when  not  currently  needed 
for  a  dedicated  purpose  may  be  made  available  to  meet  demands 
upon  the  general  fund. 

In  formulating  its  executive  budget  plan  our  committee 
has  proceeded  cautiously  and  with  an  eye  for  facts  only.  We 
have  carefully  checked  and  supplemented  our  first-hand  know- 
ledge of  state  finances  with  a  scientific  study  of  state  budget 
systems,  begun  by  the  State  Chamber's  Research  Director  eigh- 
teen months  ago  and  completed  early  this  year.  This  research 
study  is  printed  with  our  report  and  contains  the  most  complete 
appraisal  extant  of  Pennsylvania's  appropriations  methods, 
the  technique  and  operating  results  of  budget  systems  in  the 
American  states. 

We  have  evolved  no  fiscal  ''cure-all."  But  we  believe  that 
installation  of  our  proposed  executive  budget  will  remedy  the 
principal  defects  in  Pennsylvania's  method  of  expending  pub- 
lic funds,  and  secure  for  the  Commonwealth  the  substantial 
advantages  of  budgetary  control  now  accruing  to  the  states 
having  the  most  practical  and  approved  budget  systems.     To 

19 


obtain  these  results,  however,  will  require  capable  and  faithful 
state  officials,  supported  or  criticized — as  occasion  warrants — by 
an  alert  electorate  reliably  informed  of  the  state's  needs,  its 
financial  condition  and  problems.  Though  absorbed  in  local 
affairs  on  the  one  hand,  and  attracted  by  national  issues  on  the 
other,  we  can  ill-afford  to  neglect  state  government  which  vit- 
ally affects  ninety  pgr  cent  of  all  of  our  personal  and  business 
relations. 


20 


PENNSYLVANIA'S  APPROPRIATION 

METHODS 

AND 

BUDGET  SYSTEMS  IN  THE  STATES 


Survey  by  LEONARD  P.  FOX,  PK.   D. 

Director  of  tKe  Research  Bureau 
Pennsylvania  State  CKamter  of  Commerce 


Under  tKe  Supervision 

of  the  State  Budget  Committee 

April,   1(522 


Chapter  I 

METHODS  OF  APPROPRIATING  STATE  FUNDS  IN 

PENNSYLVANIA 

A  Need  for  Appraisal  of  the  State's  Financial  Methods 

A  critical  appraisal  of  Pennsylvania's  methods  of  appro- 
priating public  funds  is  particularly  timely  and  urgent  in 
view  of 

(1)  budgetary  progress  in  the  states, 

(2)  mounting  cost  of  our  state  government,  and 

(3)  the  present  controversy  over  the  state's  finan- 

cial condition. 

« 

Following  approved  business  practices,  the  Federal  Govern- 
ment and  all  of  the  states  except  Rhode  Island  and  Pennsyl- 
vania have  established  a  permanent  budget  procedure.  Advo- 
cates of  a  budget  system  for  Pennsylvania  need  not  be  disheart- 
ended  by  rejection  of  the  recent  call  for  a  constitutional  con- 
vention promising  speedy  adoption  of  a  budget  system.  The 
door  to  an  individual  budget  amendment  is  still  open.  More- 
over, only  three  states —  Maryland,  Massachusetts  and  West 
Virginia — of  the  forty-six  now  operating  under  a  budget  plan 
incorporated  it  in  their  state  constitutions,  forty-three  having 
installed  it  by  legislative  enactment. 

In  the  1921  legislature  an  act  to  submit  the  Constitutional 
Commission's  executive  budget  amendment  to  popular  vote 
passed  the  house  but  died  in  the  senate  committee  on  appropri- 
ations. A  bill  creating  a  budget  commission  consisting  of  the 
governor,  auditor  general  and  state  treasurer  was  adopted  by 
the  house  but  held  up  by  the  same  senate  committee.  Another 
executive  budget  bjll  never  reached  the  floor  of  the  senate  be- 
cause it  was  not  reported  out  by  the  appropriations  committee. 

The  need  for  economy  in  state  expenditures  makes  this 
rejection  of  a  budget  system  especially  ill-timed.  From  Table 
I,  it  appears  that  the  state's  annual  appropriations  have  in-. 

22 


creased  from  $13,000,000  twenty  years  ago,  to  $31,000,000  ten 
years  ago,  and  $58,000,000  in  the  current  biennium. 

Recently  Main  and  Company's  audit  of  state  accounts  re- 
vealed that  the  Commonwealth  now  owes,  or  has  pledged  for  ex- 
penditure in  this  biennium,  a  sum  of  money  probably  in  excess 
of  the  estimated  revenues  it  can  collect.  The  audit  indicates  a 
net  appropriation  liability.  May  31,  1921,  of  $139,382,027.72, 
including  payments  due  to  municipalities  from  receipts  of  for- 
eign fire  insurance  companies  and  obligations  under  the  acts 
of  1915,  1917,  1919  and  1921.  To  this  liabiUty  for  the  two 
year  period  ending  May  31,  1923,  will  be  added  such  defici- 
encies as  no  doubt  will  occur  prior  to  that  date,  which  for  the 
period  ending  May  31,  1921,  amounted  to  $8,606,843.63;  also 
such  liabilities  as  will  arise  in  carrying  out  the  provisions  of 
acts  similar  to  that  establishing  the  Wyoming  Valley  Memorial 
Park.i  In  approving  appropriations  by  the  last  legislature, 
the  governor  estimated  the  maximum  income  of  the  state  for 
1921-1923,  at  $114,000,000.  The  expert  accountants  claim  that 
deduction  of  ear-marked  and  non-revenue  funds  from  this 
amount  reduces  the  available  revenue  to  $89,000,000,  plus  $22,- 
000,000  expected  from  new  taxes.^  But  the  gasoline  tax 
will  yield  only  $3,000,000;  the  coal  tax  estimated  at  $12,000,000 
to  $15,000,000  may  be  found  unconstitutional;  the  increase  in 
the  collateral  inheritance  tax  is  problematical;  and  business  de- 
pression may  diminish  returns  from  the  corporation  taxes. 
Therefore,  the  state  faces  a  possible  deficit  of  more  than  $20,000,- 
000  at  the  end  of  the  biennium. 

On  the  other  hand,  the  state  treasurer  predicts  a  surplus 
of  $2,000,000  at  the  close  of  the  present  appropriation  period. 
New  taxes  and  increased  yield  from  old  levies,  owing  to  the 
normal  expansion  of  business,  will  assure  total  receipts  of  $106,- 
000,000.2     Payments  made  prior  to  June  1  reduced  the  1921 

(1)  Accountants  Report  to  the  Auditor  General  Showing  Financial 
Status  of  the  Commonwealth  of  Pennsylvania,  May  31,  1921,  pp.  2-3 

(2)  Philadelphia  Public  Ledger,  September  18,  1921. 

(3)  This  is  an  optimistic  estimate;  for  in  1921  the  general  fund 
receipts  of  $47,215,826,  excluding  the  gasoline  tax,  exceeded  those  of 
1920  by  only  $1,426,572.     Harrisburg  Telegraph,  December  3,  1921. 

23 


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25 


appropriation  liability  to  less  than  $114,000,000;  and  a  further 
cut  of  $10,000,000  is  in  sight  through  savings  from  appropri- 
ations never  used  (normally,  10  percent)  and  the  nullification 
of  grants  to  sectarian  institutions.  The  treasurer,  therefore, 
anticipates  an  appropriation  liabilty  of  $104,000,000  in  the  pres- 
ent biennium.*  This  forecast  apparently  disregards  the  con- 
tinuing obligations  under  the  acts  of  1915,  1917  and  1919. 

Further  evidence  of  the  hit-or-miss  relationship  between 
state  expenditures  and  income  is  afforded  by  the  deficiency  ap- 
propriations made  in  the  past  twenty  years  (Table  I)  and  the 
excess  of  general  fund  disbursements  over  receipts,  December 
1,  1915,  to  May  31,  1921  (Table  II). 

Confused  by  these  contradictory  fiscal  forecasts,  the  pub- 
lie  demands  more  light  upon  state  finances.  This  situation 
strengthens  the  sentiment  for  a  system  of  budgetary  control 
compelling  the  state  like  any  sound  business  concern  to  live 
within  its  income. 

Lack  of  Unity  and  Coordination  in  Presentation  of  Appropri- 

tion  Bills  and  Revenue  Measures 

In  the  business  world  no  undertaking  can  be  efficiently 
administered  which  does  not  have  a  system  of  accounts  and  re- 
ports that  will  permit  the  directing  body  and  the  stockholders 
to  secure  a  complete  and  accurate  picture  of  past  operations, 
present  conditions  and  future  program  of  activities.  Such  in 
formation  on  state  finances  is  not  now  available  to  the  legisla- 
ture and  governor.  Yet  they  direct  and  manage  a  great  busi- 
ness enterprise  extending  service  to  its  citizen-stockholders  at 
a  cost  of  over  $80,000,000  a  year. 

In  Pennsylvania  little  is  done  to  focus  attention  of  the 
legislators  and  public  upon  the  state's  finajicial  and  work 
program  as  a  whole.  Neither  constitution  nor  statute  effec- 
tively centralizes  responsibility  in  any  official  or  board  for  the 
formulation  and  submission  to  the  legislature  of  a  complete  ex- 
penditure program.  No  single  document  records  the  estimates 
and  proposes  a  comprehensive  plan  of  expenditures  commen- 


(4)     Harrisburg  Patriot,  August  5,  1921. 

26 


surate  with  the  anticipated  revenues  of  the  state.  Legislative 
appropriations,  therefore,  are  made  in  a  piecemeal  and  hap- 
hazard manner;  income  and  outgo  are  not  properly  balanced. 

Corresponding  in  part  to  the  complete  budget  estimates 
in  other  states  is  a  general  appropriation  bill  prepared  by  the 
house  appropriations  committee  on  the  basis  of  departmental 
requests  and  introduced  in  the  house  by  the  chairman  of  the 
appropriations  committee.  It  provides  for  the  ordinary  ex- 
penses of  the  three  major  departments,  interest  on  the  public 
debt,  support  of  the  public  schools  and  bills  incurred  but  unpaid. 
In  the  last  session  this  bill  of  103  folio  pages  was  introduced 
on  March  7,  carrying  a  total  appropriation  of  approximately 
$59,000,000,  less  than  one-half  of  the  entire  funds  eventually 
voted  by  the  legislature.  It  merely  itemizes  appropriation  re- 
quests by  organization  units  and  objects  of  expenditure.  For 
want  of  a  summary  table  the  individual  legislator  must  compute 
the  grand  total  and  the  amount  voted  to  a  particular  depart- 
ment or  bureau.  He  is  unable  to  determine  the  cost  of  a  specific 
function  within  an  organization  unit. 

Supplementing  the  general  appropriation  bill  are  numer- 
ous private  bills  granting  money  to  state  institutions,  private, 
charitable  and  educational  institutions,  governmental  depart- 
ments and  commissions,  highways  and  other  public  undertak- 
ings. In  the  last  legislature,  over  600  such  bills  were  intro- 
duced, in  some  eases  involving  duplication  of  expenditure  pro-  • 
posals  in  the  two  houses;  and  in  1921  the  governor  approved 
450  separate  appropriation  measures.  On  this  practice  the 
comment  of  Odell  Hauser  is  especially  pointed:^ 

"Such  bills  may  be  and  are  habitually  introduced  into  either 
the  Senate  or  the  House.  The  introduction  of  such  a  bill  is  an 
entirely  individual  matter.  No  one  is  responsible  for  it  but  the 
member  who  introduces  it.  As  a  matter  of  fact,  the  phrase, 
'getting  an  appropriation  from  the  State,'  illustrates  the  way 
those  of  us  who  are  in  active  touch  with  the  system  think  of  it. 

(5)     Philadelphia  Public  Ledger,  May  8,  1921. 

Article  III,  section  14,  of  the  state  constitution  provides  that,  "All 
bills  for  raising  revenue  shall  originate  in  the  House  of  Representatives, 
but  the  Senate  may  propose  amendments  as  in  other  bills." 


"It  is  not  that  the  State  is  the  initiating  factor  which  appro- 
priates its  funds,  but  that  individuals  who  want  to  get  money 
from  the  State  are  the  ones  who  initiate  action.  If  there  is  no 
one  who  is  sufficiently  interested  in  a  certain  project  to  initiate 
action  toward  an  appropriation  for  that  project,  it  will  go  with- 
out. There  is  no  one  definitely  and  legally  charged  with  the 
responsibility  of  seeing  that  all  the  projects  for  which  the  State 
should  appropriate  money  are  looked  after." 
• 

The  constitution  encourages  but  does  not  necessitate  this 
lack  of  unity  in  the  state's  plan  of  expenditures.  Article  III, 
section  15,  provides: 

"The  general  appropriation  bill  shall  embrace  nothing  but  ap- 
propriations for  the  ordinary  expenses  of  the  executive,  legisla- 
tive and  judicial  departments  of  the  Commonwealth,  interest  on 
the  public  debt  and  for  public  schools;  all  other  appropriations 
shall  be  made  by  separate  bills,  each  embracing  but  one  subject." 

This  provision  does  not  prohibit  formal  executive  recom- 
mendations for  all  state  appropriations,  general  and  special, 
enabling  the  legislator  to  visualize  the  total  demands  upon  the 
state  treasury.  Though  not  embodied  in  separate  bills,  such 
recommendations  for  special  appropriations  could  serve  as  a 
basis  for  the  individual  appropriation  bills  required  by  the 
constitution.  However,  inertia,  unwillingness  to  assume  fin- 
ancial leadership,  or  fear  of  being  charged  with  usurpation  of 
legislative  functions  have  disposed  governors  to  influence  special 
appropriation  bills  only  by  private  conferences  with  committees 
or  individual  legislators.  In  the  past  the  governor  has  not 
even  approved  the  recommendations  of  the  state  board  of 
charities  for  legislative  guidance  in  grants  to  benevolent  insti- 
tutions receiving  state  aid. 

Inadequate  Information  on  Expenditures  and  Revenues 

Available  to  the  Legislator 

What  information  on  the  state's  financial  condition  is  sub- 
mitted to  the  legislators  considering  this  piecemeal  appropriation 
program? 

Section  46  of  the  Laws  of  Pennsylvania,  1810-1811,  page 
156,  provides: 

28 


"The  State  Treasurer  shall  on  the  fourth  Monday  in  December, 
annually,  make  report  to  the  legislature  exhibiting  in  detail 
the  receipts  and  expenditures  of  the  state  treasury  for  the  pre- 
ceding year,  ending  the  last  day  of  November,  designating  the 
name  of  every  person  from  whom  moneys  were  received  and  to 
whom  moneys  have  been  paid,  and  on  what  account  ..." 

Under  sections  1  and  2  of  the  Laws  of  Pennsylvania,  1831- 
1832,  page  154: 

"(1)  It  shall  be  the  duty  of  the  State  Treasurer  to  digest, 
prepare  and  lay  before  the  General  Assembly,  at  the  commence- 
ment of  every  session,  a  report  on  the  subject  of  finance,  con- 
taining estimates  of  the  public  revenue  and  public  expenditures 
and  plans  for  the  support  of  public  credit,  and  for  improving  or 
increasing  the  revenues  from  time  to  time,  for  the  purpose  of 
giving  information  to  the  General  Assembly  in  adopting  modes 
of  raising  money  requisite  to  meet  the  public  expenditure. 

"(2)  It  shall  be  the  duty  of  the  State  Treasurer  to  annex  to 
the  annual  estimates  of  the  appropriations  required  for  the  pub- 
lic service  of  the  year,  (appropriations)  which  may  have  been 
made  by  former  acts,  and  also  a  statement  of  the  sums  remaining 
in  the  treasury  from  the  appropriations  of  former  years,  esti- 
mating  the  amount  of  those  sums  which  will  not  be  required  to 
defray  expenses  incurred  in  a  previous  year,  and  showing  the 
whole  amount  which  will  be  subject  to  the  disiposition  of  the 
government  in   the  year  to  which   the   estimates  apply." 

The  auditor  general,  by  the  same  act  of  1811,  is  required 
on  the  fourth  Monday  in  December,  annually,  to  make  a  report 
which  shall  exhibit  in  the  abstract  a  statement  of  the  finances 
of  the  Commonwealth. 

By  an  act  of  1919,  all  reports  to  be  made  annually  under 
existing  law,  shall  hereafter  be  made  biennially  only.  All 
such  reports  shall  be  made  to  the  governor,  not  later  than 
the  first  day  of  June  of  each  odd-numbered  year,  and  shall 
cover  the  report  of  the  department,  board,  bureau,  division  or 
commission,  for  the  two  years  immediately  preceding.  Such 
reports  shall  be  printed  and  distributed  only  on  order  of  the 
governor.^ 


(6)     Act  No.  68,  P.  L.  1919,  p.  89. 

29 


Owing  to  the  high  cost  of  printing  and  other  reasons,  no 
printed  reports  of  the  auditor  general  and  state  treasurer  have 
been  issued  since  1917  and  1918,  respectively.  In  the  1921  ses- 
sion a  resolution  requesting  these  officers  to  prepare  and  lay 
before  the  general  assembly  at  the  earliest  possible  moment  an 
account  and  report,  as  provided  in  the  acts  of  1811  and  1832, 
was  referred  to  the  house  committee  on  ways  and  means.  No 
further  action  was  taken  on  this  resolution;  for  such  accounts 
and  reports  for  1919  and  1920  were  presumably  made  to  the 
governor,  and  the  act  of  1919  vested  him  with  sole  authority 
for  their  publication  and  distribution. 

The  1918  treasurer's  report  devotes  seventeen  pages  to 
statements  of  the  general  and  special  funds  at  the  close  of  the 
fiscal  year,  November  30,  1918 ;  comparative  and  summary  state- 
ments of  receipts  for  the  years  1917  and  1918 ;  and  comparative 
and  summary  statements  of  expenditures  for  the  years  1917  and 
1918,  by  organization  units  and  sundry  activities.  A  detailed 
statement  of  receipts  and  expenditures  by  months  fills  the  re- 
maining 1360  pages. 

As  budgetary  information  the  detailed  statement  of  re- 
ceipts from  and  expenditures  to  persons  is  practically  valueless. 
A  century  ago  when  state  revenue  was  less  than  $2,000,000 
such  statement  may  have  contributed  to  an  understanding  of 
state  finances.  Today  when  annual  revenue  exceeds  $80,000,000 
such  bulky  and  undigested  statement  merely  annoys  and  con- 
fuses the  legislator.  The  comparative  summary  of  expenditures 
has  a  limited  utility  owing  to  the  lack  of  complete  and  uniform 
classification  according  to  organization  units,  functions  and 
objects.  For  budget  purposes  the  treasurer's  report  is  further 
impaired  by  non-compliance  with  sections  1  and  2  of  the  act 
of  1832  covering  annual  estimates  of  receipts  and  expenditures. 

In  partial  compliance  with  the  demand  for  publication  of 
the  financial  reports  under  the  acts  of  1811  and  1832,  the  recent 
legislature  was  given  an  unsigned  summary  statement  of  re- 
ceipts and  expenditures  for  1919  and  1920.  By  including  special 
(ear-marked)  and  non-revenue  funds  in  the  general  fund  re- 
ceipts, this  statement  showed  revenues  for  the  general  fund 
in  1919  of  $52,019,760,  instead  of  the  actual  $43,637,000,  and  in 

30 


1920,  $62,071,293,  instead  of  the  actual  $45,789,000.  Hence  the 
legislature  of  1921  was  misled  to  base  its  appropriations  upon 
an  expected  revenue  of  $114,000,000,  excluding  new  taxes,  in 
contrast  with  the  probable  income  of  $89,000,000.  The  legis- 
lature was  further  uninformed  of  a  balance  of  $27,000,000  due 
upon  continuing  appropriations  by  the  acts  of  1915,  1917, 
1919.7 

This  informal  report  violated  sections  1  and  2  of  the  act  of 
1832  and  verified  the  prediction  of  the  State  Economy  and  Effici- 
ency Commission  (1917)  that  in  time  the  creation  of  special  funds 
would  make  it  impossible  for  the  fiscal  officers  of  the  Common- 
wealth to  strike  a  trial  balance.^ 

The  auditor  general's  report  for  1917  contains  a  summary 
of  receipts  by  sources  for  the  current  fiscal  year;  a  balanced 
statement  of  revenues  and  expenditures  by  decades  from  1850 
to  1910,  and  by  years  from  1910  to  date;  a  statement  of  the 
public  debt;  a  statement  showing  the  amount  of  stock  held  by 
the  Commonwealth  in  sundry  corporations;  a  statement  of  the 
Commonwealth's  revenues  in  1917,  detailing  the  public  of- 
ficer, the  person,  firm  or  corporation  from  whom  received;  and 
a  detailed  statement  of  expenditures  in  1917  by  organization 
units.  Thirteen  pages  are  given  to  the  summary  tables ;  nearly 
six  hundred  to  the  detailed  statement  of  receipts  and  disburse- 
ments. Including  less  comparative  data,  the  auditor  general's 
report  is  even  less  useful  for  budget  purposes  than  the  treas- 
urer's. An  expert  accountant  of  national  reputation  thus  com- 
mented upon  a  similar  but  earlier  report  of  the  auditor  gen- 
eral:^ 

"It  includes  a  detailed  statement  of  expenditures  classified  ac- 
cording to  organization  units.  For  each  organization  a  list  of 
the  payees  appears  in  complete  detail  with  the  result  that  in 
1914,    the    statement    covered    three    hundred    and    twenty-two 

(7)  Philadelphia  Public  Ledger,   September   18,   1921. 

(8)  Report  of  the  Solicitor  of  the  Economy  and  Effiiciency  Commis- 
sion of  the  Commonwealth  of  Pennsylvania,  1917,  p.  25. 

(9)  Oakey,   F.  O.,   Principles  of  Government  Accounting  and   Re- 
porting, Appleton,   1921,   p.   390. 

31 


printed  pages.  A  statement  of  expenditures  of  this  character  is 
of  practically  no  use.  There  is  no  classification  of  expenditures 
according  to  functions,  character  or  objects." 

The  le^slature  must  needs  act  upon  appropriation  and 
revenue  bills  without  adequate  information.  No  official  esti- 
mate and  analysis  of  available  or  proposed  state  revenues  ac- 
company the  general  appropriation  bill.  No  balanced  statement 
of  general  and  special  funds  is  placed  in  the  legislator's  hands. 
He  lacks  summary  and  detailed  data  comparing  the  general 
and  special  expenditures  proposed  with  the  costs  for  the  current 
and  two  preceding  fiscal  years,  classified  by  organization  units, 
character,  functions  and  objects.  He  has  no  accurate  data  fa- 
cilitating a  comparison  of  specific  state  services  on  the  basis  of 
utility,  efficiency  and  operating  costs. 

Little  wonder  that  the  speaker  of  the  1921  house  com- 
plained :^^ 

"It's  an  outrage  to  have  the  House  going  into  the  final  weeks 
of  the  session  without  adequate  and  comprehensive  knowledge 
of  the  State's  financial  condition.  There  is  no  excuse  for  it  and 
the  House,  apparently,  never  profits  by  experience.  The  same 
condition  has  existed  year  in  and  year  out." 

The  sponsor  of  a  budget  bill  passed  by  the  last  house 
wrote  to  the  Philadelphia  Public  Ledger :^^ 

"Speaking  for  those  serving  in  the  Legislature  in  1921  *  *  * 
I  can  state  that  there  was  no  subject  upon  which  it  was  more 
diflficult  to  obtain  positive  information  than  the  actual  condition 
of  State  finances.  There  had  been  no  printed  report  of  the  Audi- 
tor General  since  1917,  and  the  provisions  of  the  Act  of  March 
16,  1832,  which  required  the  State  Treasurer  to  digest,  prepare 
and  lay  before  the  General  Assembly  at  the  beginning  of  the 
session  a  report  on  the  subject  of  finance,  containing  estimates 
of  the  public  receipts  and  public  expenditures,  were  not  complied 
with." 


Spangler   in   Harrisburg  Patriot,   April   8,   1921. 
Edmonds   in   Philadelphia   Public   Ledger,   October   24, 


32 


(10) 

R.   S, 

(11) 

F.    S 

1921. 

Ineffective  Consideration  of  Appropriation  Bills  hy  the 
Senate  and  House  Appropriations  Committees 

The  appropriations  committees  of  the  house  and  senate 
(53  and  43  members,  respectiviely,  in  1921)  do  not  meet  jointly 
to  consider  expenditure  proposals.  Occasionally  they  hold 
joint  public  hearings  on  specific  bills  only,  neglecting  the  op- 
portunity to  concentrate  public  attention  upon  a  careful  scrutiny 
of  State  expenditures  as  a  whole. 

In  the  early  months  of  the  session  there  is  an  undigested 
mass  of  appropriation  bills  lying  in  the  house  and  senate.  No 
one — not  even  the  chairmen  of  the  two  appropriations  com- 
mittees— know  the  approximate  totals  requested,  what  further 
requsts  may  be  expected,  and  the  date  of  their  presentation. 
The  most  important  single  appropriation  bill,  the  general  ap- 
propriation bill,  is  introduced  in  the  house  only  in  skeleton  form. 
''It  does  not  mean  a  thing  as  it  first  comes  into  the  house.  It 
lies  with  all  the  other  bills  calling  for  money  until  such  time 
as  life  is  breathed  into  it. 

''The  time  for  breathing  life  into  the  appropriation  bills 
comes  during  the  last  two  weeks  of  the  session.  At  about  this 
period  the  chairmen  of  the  senate  and  house  appropriations 
committees  seem  mysteriously  to  awaken  to  the  fact  that  there 
are  a  lot  of  bills  in  their  committees  which  require  action.  With 
their  two  clerks  and  their  combined  experience  of  previous  ses- 
sions as  a  guide,  they  go  over  these  bills  and  begin  the  combing 
and  reduction  process.  They  are  aided  by  the  results  of  hearings 
they  have  held  on  particular  bills. 

"They  generally  meet  with  the  Governor  and  go  over  the 
situation  with  him.  Sometimes  they  consult  with  the  Auditor 
General  and  the  State  Treasurer.  From  the  combined  wisdom 
of  these  men  the  bills  are  now  reduced  in  amount  and  gotten 
into  some  kind  of  order.  "^^ 

Effective  consideration  of  appropriation  bills  in  the  meet- 
ing of  the  house  and  senate  appropriations  committees  is  im- 
possible. The  individual  member  is  bewildered  by  a  general 
appropriation  bill  of  over  100  pages,  carrying  $50,000,000  or 

(12)     Odell  Hauser  in  Philadelphia  Public  Ledger,  May  8,  1921, 

33 


1 


more,  and  some  600  individual  appropriation  bills  scattered  be- 
tween the  committees  of  the  house  and  senate.  In  the  1921 
legislature,  bills  were  introduced  carrying  appropriations  oi: 
$180,000,000.1^  Lacking  summary  and  detailed  statements  of 
expenditures  proposed,  in  comparison  with  costs  for  similar 
activities  in  the  current  and  preceding  fiscal  years,  the  com- 
mittee member  l^as  no  comprehensive  understanding  of  state 
finances.  Moreover,  there  is  no  provision  for  early  presentation 
of  a  revenue  program  should  existing  sources  prove  inadequate. 
Yet  until  the  member  knows  whether  the  revenue  in  sight  will 
be  adequate,  or,  it  not,  how  it  can  and  will  be  increased,  he  can 
not  intelligently  balance  expenditures  against  each  other  and 
the  total  income. 

Piecemeal,  Haphazard  and  Hasty  Actiofi  upon  Appropriation 
and  Revenue  Measures  hy  the  Senate  and  House 

Under  these  circumstances  the  mass  of  bills  is  flung  into 
the  house  and  senate  in  the  last  hectic  days  of  the  session.  Few 
legislators  know  much  about  the  appropriations  as  a  whole,  ex- 
cept the  chairmen  of  the  appropriations  committees,  their  clerks 
and  a  small  group  of  party  leaders.  Generally  the  legislator 
looks  out  for  the  individual  bills  he  has  sponsored  and  takes 
the  others  on  faith — accepts  the  committee  recommendations. 
This  situation  inspires  log-rolling  and  trading  of  votes  among 
members  to  get  funds  for  their  local  institutions  or  political 
friends — a  process  not  conducive  to  economy  or  aid  to  the 
most  worthy.  The  legislator  loses  sight  of  available  state  rev- 
enue,' the  importance  of  his  project  in  the  stater's  work  pro- 
gram as  a  whole,  and  the  relative  utility  and  efficiency  of  vari- 
ous services  performed  by  public  and  private  agencies. 

Generally  bills  are  jammed  through  the  houses  by  per- 
functory roll  calls,  mast  of  them  in  the  few  days  before  ad- 
journment. In  the  1919  session,  closing  June  26,  378  appropria- 
tion bills  carrying  $36,000,000  were  passed  in  the  second  week 
before  adjournment;  and  56  bills  carrying  nearly  $52,000,000 
in  the  last  week.     Inaction  of  the  legislative  leaders  will  force 

^ *•  — —  — 

(13)     Philadelphia   Public  Ledger,  April   25,   1921.  ^^^ 

34  :"^ 


the  governor  to  sponsor  revenue  bills  at  the  end  of  the  session, 
perhaps,  when  time  does  not  permit  deliberate  discussion  or 
careful  estimate  of  their  yield.  Consequently,  the  legislature 
adjourns  without  knowing  the  total  expenditures  and  revenues 
authorized  and  consigns  to  the  governor  the  task  of  proportion- 
ing expenditures  to  relative  needs  and  available  income. 

In  this  connection  Article  IV,  sections  15  and  16,  of  the 
state  constitution  is  pertinent. 

"Section  15.  Every  bill  which  shall  have  passed  both  Houses 
shall  be  presented  to  the  Governor;  if  he  approve  he  shall  sign 
it,  but  if  he  shall  not  approve  he  shall  return  it  with  his  objec- 
tions to  the  House  in  which  it  shall  have  originated,  which 
House  shall  enter  the  objections  at  large  upon  their  journal,  and 
proceed  to  re-consider  it.  If,  after  such  re-consideration,  two- 
thirds  of  all  the  members  elected  to  that  House  shall  agree  to 
pass  the  bill,  it  shall  be  sent  with  the  objections  to  the  other 
House  by  which  likewise  it  shall  be  re-considered,  and  if  ap- 
proved by  two-thirds  of  all  the  members  elected  to  that  House  it 
shall  be  a  law;  but  in  such  cases  the  votes  of  both  Houses  shall 
ibe  determined  by  yeas  and  nays,  and  the  names  of  the  members 
voting  for  and  against  the  bill  shall  be  entered  on  the  journals 
of  each  House  respectively.  If  any  bill  sihall  not  be  returned  by 
the  Governor  within  ten  days  after  it  shall  have  been  presented 
to  him,  the  same  shall  be  a  lawjn  like  manner  as  if  he  had 
signed  it,  unless  the  General  Assembly,  by  their  adjournment, 
prevent  its  return,  in  which  case  it  shall  be  law,  unless  he  shall 
file  the  same,  with  his  objections,  in  the  office  of  the  Secretary 
of  the  Commonwealth,  and  give  notice  thereof  by  public  pro- 
clamation within  thirty  days  after  such  adjournment. 

"Section  16.  The  Governor  shall  have  power  to  disapprove  of 
any  item  or  items  of  any  bill,  making  appropriations  of  money, 
embracing  distinct  items,  and  the  part  or  parts  of  the  bill  ap- 
proved shall  be  the  law,  and  the  item  or  items  of  appropriation 
disapproved  shall  be  void,  unless  re-passed  according  to  the  rules 
and  limitations  prescribed  for  the  passage  of  other  bills  over 
the  executive  veto." 

Governor's  Bedtt<:tion  of  Appropriation  Bills  to  Balance 
Revenues  and  Expenditures 

The  governor's  examination  and  consideration  of  appropria- 
tion and  revenue  bills,  in  the  thirty  day  period  following  ad- 
journment of  the  legislature,  affords  the  first  opportunity  for  a 

35 


systematic  and  comprehensive  survey  of  state  finances.  Ap- 
propriation bills  are  summarized  and  compared  with  past  grants 
and  estimated  income  from  existing!  and  proposed  revenue 
measures.  As  a  rule  the  governor  finds  it  necessary  to  reduce 
materially  the  money  voted  by  the  legislature.  Upon  adjourn- 
ment of  the  last  session  it  was  thought  that  appropriations 
passed  totaled  $135,000,000.  The  governor 's  examination  in- 
dicated a  total  of  $141,000,000.14  During  the  session  revenue  in 
the  next  biennium  was  first  estimated  at  $90,000,000  to  $100,- 
000,000  and  later  at  $114,000,000.  With  the  approval  of  the 
coal,  gasoline  and  collateral  inheritance  tax  bills,  the  governor 
cut  the  appropriations  $25,000,000  to  balance  them  with  an 
estimated  revenue  of  approximately  $114,000,000.  These  re- 
ductions are  necessarily  made  in  a  more  or  less  arbitrary  and 
rule-of-thumb  manner;  for  the  governor  lacks  an  agency  com- 
petent to  supply  complete  and  accurate  information  (m  state 
needs,  based  upon  a  current  operation  study  of  the  Common- 
wealth's activities. 

If  the  governor  ought  to  be  entrusted  with  the  power  to 
veto  items  of  appropriation  after  the  legislature  adjourns,  when 
his  word  is  final,  can  h,e  not  alone  or  in  conjunction  with  a 
budget  board  he  entrusted  With  full  power  to  prepare  tor  legis- 
lative review  and  action  the  financial  program  of  the  state? 
Submission  of  a  tentative  appropriation  and  revenue  plan  h} 
the  governor  or  administrative  board,  allocating  funds  accord- 
ing to  relative  needs  and  services  of  state  and  state -aid  agencies, 
would  enable  the  legislature  to  visualize  state  finances  as  a  whole 
and  facilitate  deliberate  and  informed  action  upon  appropria- 
tion bills  prior  to  the  congested  closing  days  of  the  session. 

Such  financial  plan  would  also  help  to  ^  responsibility  for 
the  apportionment  of  public  funds.  For  the  correlation  of 
appropriations  and  income  the  governor  is  clearly  responsible. 
Since  the  governor  can  reject  or  reduce,  but  not  increase,  ap- 
propriation items  it  is  desirable  that  during  the  session  the  gov- 


(14)     Pliiladelphia   Public   Lt'dger,   May   8,   29,   1921. 
The  usual  lapsing  of  10%  of  appropriatious  would  reduce  the  $110,- 
701,078  approved  to  the  estimated  income. 


36 


ernor  and  legislature  should  be  on  record  concerning  grants 
which  one  or  the  other  regards  as  excessive  or  inadequate.  Then 
the  public  could  determine  responsibility  for  the  neglect  of 
state  needs,  and  also  challenge  the  good  faith  of  the  legislator 
claiming  to  vote  for  an  appropriation  in  ignorance  of  its  prob- 
able veto  to  balance  expenditures  with  receipts. 

Lack  of  Adequate  Control  over  Expenditures 

The  state  has  made  inadequate  provision  for  economical 
control  of  its  expenditures. 

There  is  no  effective  check  on  the  evil  of  the  "deficiency''       /v 
appropriation.     A  department,  board  or  institution  is  not  re- 
quired  to  live  within  its  income  by  carefully  extending  its  ap-  \ 
propriation  over  the  entire  biennium.     On  the  contrary,  it  may   V 
exhaust  its  regular  appropriation  before  the  end  of  the  two  year    I 
period  and  then  petition  the  next  legislature  for  a  deficiency     i 
grant  to  cover  bills  incurred  but  unpaid.     This  practice  has     I 
been  chronic  in  the  past  twenty  years  as  an  examination  of     | 
Table  II  reveals;   and  continuance  at  its  present  rate  of  in- 
crease will  develop  a  public  scandal.     The  deficiency  habit  en- 
courages waste  and  extravagance.     It  is  reflected  in  cumulative 
deficits  in  the  general  fund  which  postpone  rather  than  avert 
the  day  of  financial  judgment. 

Continuing  and  special  appropriations  render  it  increas- 
ingly difficult  to  close  state  accounts  at  the  end  of  the  fiscal 
year  and  prepare  a  balanced  statement  of  the  state 's  finances  as 
a  basis  for  new  appropriations. 

At  present  there  are  twenty -two  ear-marked  funds  not  avail- 
able for  meeting  general  fund  obligations.^^  Since  Decem- 
ber 1,  1915,  these  special  funds  have  increased  as  indicated  in 
Table  III.  In  reckoning  the  cost  of  state  government,  the  pub- 
lic overlooks  the  growing  proportion  of  receipts  dedicated  to 
special  purposes  and  gets  an  incomplete  picture  of  state  revenues 
and  expenditures. 

(15)  Chart  of  State's  Income,  December  1,  1920,  to  November  30, 
1921,  prepared  by  H.  S.  McDevitt  for  the  Commission  on  Reorganiza- 
tion of  the  State  Government  of  Pennsylvania,  March,  1922. 


Such  funds  give  a  very  wide  discretion  to  the  spending  of- 
ficers of  oertain  departments.  They  also  tend  to  impoverish  the 
general  fund,  prohibiting  the  treasurer  from  taking  advantage 
of  cash  discounts  and  meeting  urgent  demands  for  funds  ap- 
propriated, while  large  balances  are  accumulated  and  frozen 
in  the  ear-marked  accounts.  Consequently,  the  state  can  not 
purchase  as  economically  as  a  private  concern,  and  institutions 
and  other  agencies  are  forced  to  borrow  money  and  incur 
interest  charges  involving  additional  deficiency  appropriations. 

The  discretionary  use  of  contingent  funds  permits  the  ex- 
penditure of  thousands  of  dollars  annually  for  payment  of  ac- 
counts that  have  not  been  audited.  "What  a  contingent  fund 
may  be  used  for  has  never  been  defined  by  Act  of  Assembly, 
but  it  is  usually  left  to  the  discretion  of  the  several  Depart- 
ments, subject,  of  course,  to  approval  by  the  Auditor  General 
and  State  Treasurer.  *  *  *  *  Advances  from  these  appropria- 
tions are  made  to  the  Departments,  and  after  they  have  been 
expended,  vouchers  are  filed  in  the  Auditor  General's  office,  to- 
gether with  requisition  for  another  advance.  This  system  of 
advances  continues  throughout  the  entire  appropriation  of  two 
years,  so  that  such  expenditures  are  made  by  Departments  as 
a  rule  several  months  before  the  accounts  are  audited,  "i® 

Finally  dissimilarity  of  bookkeeping  and  accounting  sys- 
tems in  state  departmients  and  institutions  violates  sound  prin- 
ciples of  private  and  public  finance.  It  renders  impossible 
the  comparison  of  unit  costs  in  departments  and  institutions 
performing  identical  or  similar  services  and  complicates  the 
problem  of  proportioned  appropriations  and  effective  audit. 
Yet  under  present  law  the  auditor  general  lacks  power  to  estab- 
lish and  supervise  uniform  and  cost  accounting  in  the  num- 
erous agencies  expending  funds  of  the  Commonwealth.^'^ 

(16)  Report  of  the  Solicitor  of  the  Economy  and  Efficiency  Com- 
mission,  25. 

(17)  Ibid.,  32. 


38 


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39 


Chapter  II 

THE  BUDGETARY  MOVEMENT  IN  THE  STATES 

In  th,e  United  States  the  years  between  the  Civil  War  and 
the  World  War  have  aptly  been  called  The  Age  of  Big  Business. 
The  states,  of  course,  shared  in  the  functioning  of  government 
in  new  and  enlarged  fields  necessitated  by  the  development  of 
business  and  industry  and  the  congestion  of  population  in  cities. 

This  normal  expansion  of  state  government  accentuated 
by  the  emergencies  of  the  World  War  is  reflected  in  the  increase 
of  total  per  capita  state  revenues  cited  below: 

1913  $3.80 

1915  4.66 

1916  4.67 

1917  5.14 

1918  5.69 

1919  6.48 

These  years  also  developed  a  well  marked  trend  toward  the 
extension  of  direct  state  taxes  upon  business.  In  1913  the  states 
received  46.5  per  cent  of  their  total  revenue  from  the  general 
property  tax  and  45  per  cent  in  1919.  In  1913,  22.5  per  cent 
were  received  from  special  property  taxes,  whereas  only  19.8 
per  cent  came  from  this  source  in  1919.  On  the  other  hand, 
business  taxes  rose  from  17.8  per  cent  of  the  aggregate  revenues 
in  1913  to  23.2  per  cent  in  1919.^ 

The  substantial  increase  in  the  cost  of  state  government 
created  the  alternative  of  narrowing  the  scope  of  public  ac- 
tivities or  remodelling  governmental  machinery  in  the  interests 
of  economy  and  efficiency.  A  first  step  in  the  latter  direction 
was  taken  in  two  states  about  ten  years  ago,  namely,  the  intro- 
duction of  a  budget  system  to  avoid  waste  in  state  expenditures, 
by  definitely  fixing  responsibility  for  unified  and  systematic 
control  over  revenues  and  expenditures. 

(1)     Annals   of    the    American    Academy    of    Political    and    Social 
Science,   May,    1921,   pp.    146-147. 

> 

40 


Definition  of  Budget 

A  budget  has  been  defined  as  a  plan  of  expenditures  for 
a  definite  period  based  on  a  careful  estimate  of  needs  and  re- 
sources, together  with  definite  proposals  for  financing  these 
expenditures.^  Reduced  to  its  simplest  terms  a  budget  in- 
volves answers  to  three  questions:^ 

*'l.  How  much  money  will  be  needed  for  the  conduct  of  the 
government  during  the  fiscal  year? 

"2.  V^hat  money  is  on  hand?  From  what  source  is  more 
expected? 

"3.  V/hat  shall  be  the  amount  appropriated  to  each  function 
of  government?" 

The  following  essentials,  however,  should  be  included  in  a  compre- 
hensive budget  system,  according  to  the  Ohio  Institute  for  Pub- 
lic Efficiency:^ 

"1.  A  definite  program  of  work  and  plans  for  financing  that 
work,  to  be  submitted  by  a  responsible  official,  preferably  the 
^ief  executive,  to  the  legislative  body,  together  with  such 
data  as  may  be  necessary  to  furnish  a  proper  understanding  of 
the   proposals. 

"2.  Proper  consideration  of  and  action  upon  this  financial 
plan  by  the  legislative  body,  to  authorize  the  raising  and  ex- 
penditure of  funds  by  the  designated  officials. 

"3.  Proper  independent  audit  of  financial  transactions  to  in- 
sure that  the  moneys  due  are  collected,  aocounted  for  or  ex- 
pended in  accordance  with  the  authorization  of  the  legislative 
body." 

To  secure  the  full  benefits  of  budgetary  control  the  budget 
must  be  regarded  primarily  as  a  work  program  and  only  sec- 
ondarily as  an  accounting  problem.  As  Gladstone  remarked, 
' '  Budgets  are  not  merely  affairs  of  arithmetic  but  in  a  thousand 

(2)  Reorganization  in  the  State  Government,  New  York  State  Re- 
construction Commission,  1919,  p.  303. 

(3)  Fitzpatrick,  E.  A.,  Budget  Making  in  a  Democracy,  Macmillan, 
1918,   p.    15. 

(4)  A   State   Budget   System    for   Ohio,   Ohio   Institute   for   Public 
Efficiency,   Columbus,   1920,   p.   3. 

41 


ways  go  to  the  root  of  the  prosperity  of  individuals,  relations 
of  classes,  the  strength  of  kingdoms. '^ 

On  this  point  the  comments  of  the  New  York  Institute  for 
Public  Service  are  especially  suggestive;^ 

"For  decades  American  cities,  states  and  national  government 
have  penalized  the  public  by  failing  to  tell  the  truth  about  neg- 
lected needs  and  by  focusing  attention  on  the  money  side  of 
budgets  while  wearing  blinders   on   the   work   side. 

"Wherever  needs  are  frankly  and  intelligently  stated  experi- 
ence shows  that  lesser  needs  give  way  to  greater  needs.  It  is 
not  true  that  money  is  more  easily  wasted  where  budget  esti- 
mates start  with  a  frank  listing  of  needs.  On  the  contrary,  it 
^becomes  extremely  difficult  to  get  money  for  waste  if  neglected 
needs  are  put  in  competition  with  waste.  The  reason  federal 
budgets  have  by  common  consent  carried  waste  by  the  hun- 
dreds of  millions  is  that  they  have  been  treated  as  fiscal  bud- 
gets, not  as  work  budgets." 

Adoption  of  Budget  Acts 

Beginning  with  California  in  1911  and  Wisconsin  in  1918 
the  budget  idea  has  been  accepted  by  forty-six  states  in  the 
past  decade.  Of  this  number  only  three — Maryland,  1916,  Mas- 
sachusetts, 1918,  and  West  Virginia,  1918 — incorporated  a  bud- 
get system  in  their  constitutions,  the  others  installing  it  by  legis- 
lative enactment.  Three  states  established  a  permanent  budget 
procedure  in  1913 — Arkansas,  Ohio  and  Oregon;  seven  states, 
in  1915 — Connecticut,  Iowa,  Minesota,  Nebraska,  North  Dakota, 
Washington  and  Vermont;  four  states,  in  1916 — Louisiana, 
Maryland,  New  Jersey  and  New  York;  six  states,  in  1917 — Illi- 
nois, Kansas,  New  Mexico,  South  Dakota,  Tennessee  and  Utah; 
six  states,  in  1918 — Georgia,  Kentucky,  Massachusetts,  Missis- 
sippi, Virginia  and  West  Virginia;  fourteen  states,  in  1919 — 
Alabama,  Arizona,  Colorado,  Idaho,  Maine,  Michigan,  Montana, 
Nevada,  New  Hampshire,  North  Carolina,  South  Carolina,  Ok- 
lahoma, Texas  and  Wyoming;  and  four  states,  in  1921 — Dela- 
ware, Florida,  Indiana  and  Missouri. 

(5)  Report  of  the  Michigan  Community  Council  Commission  to  the 
Michigan  State  Legislature,  Chapters  1  to  5,  1921,  based  upon  an  Or- 
ganization Survey  of  the  Institute  for  Public  Service,  pp.  G6-67. 

42 


In  1919,  Connecticut,  Nebraska,  New  Mexico,  South  Dakota 
and  Vermont  revised  their  budget  laws;  in  1921,  California, 
Idaho,  Miclygan,  Montana,  Nebraska,  Nevada,  North  Carolina, 
New  York,  Ohio,  Oregon,  South  Dakota,  Utah  and  Washington. 
These  revisions  affected  details  rather  than  the  type  of  budget, 
except  in  Oregon  which  changed  from  the  executive  to  an  ad- 
ministrative budget,  and  New  York  which  substituted  an  ad- 
ministrative-legislative budget  for  its  legislative  budget. 

Four  Types  of  State  Budgets 

The  budget  plans  adopted  by  the  states  are  classified  under 
four  types  with  reference  to  the  location  of  responsibility  for 
the  initiation  of  the  budget : 

1.  The  executive  type — the  governor  is  made  responsible  for 
the  formulation  of  the  budget; 

2.  The  administrative  type — a  board  of  ad|ministrative  officials 
serving  ex-officio  or  by  appointment  of  the  governor,  is  respon- 
sible for  the  preparation  of  the  budget; 

3.  The  administrative-legislative  type — a  board  of  adminis- 
trative and  legislative  officials  serving  ex-officio  or  by  appoint- 
ment of  the  governor  prepares  the  budget;   and 

4.  The  legislative  budget— a  legislative  committee  formulates 
the  budget. 

As  shown  by  Table  IV,  twenty-four  states  now  operate 
under  an  executive  budget;  thirteen  under  an  administrative 
budget;  eight  under  an  administrative-legislative  budget;  and 
one  under  a  legislative  committee  budget.  The  executive  budget 
continues  to  predominate  in  the  states,  but  the  budget  boards 
or  commissions  have  increased  substantially  since  August,  1919. 
At  that  time  twenty-two  states  had  an  executive  budget;  nine, 
an  administrative  budget;  six,  an  administrative-legislative 
budget ;  and  two,  a  legislative  budget.  The  governor  is  a  member 
of  nine  of  the  present  administrative  budget  boards  and  ap- 
points a  majority  of  the  four  remaining  boards.  He  is  in  every 
case  a  member  of  the  eight  administrative-legislative  budget 
boards.  Table  V  indicates  the  precise  personnel  of  each  budget 
board. 

43 


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The  Executive  Budget  in  the  States 

The  Maryland  and  Virginia  budget  systems  originally  found 
great  favor  among  the  states  adopting  the  executive  type  of 
budget.  Essentially,  the  difference  between  the  two  forms  is 
that  the  Maryland  amendment  places  limitations  upon  the  power 
of  the  legislature  to  increase  executive  proposals,  while  the  Vir- 
ginia law  does  not. 

/.     Maryland  and  Belated  Group — Utah,  Nevada,  Indiana,  New 
Mexico,  Alabama  and  West  Virginia 

By    constitutional    amendment    in    1916,    Maryland   estab- 
lished an  executive  budget  in  the  fullest  sense  of  the  term 
The  main  features  of  the  state's  budgetary  procedure  are  sum- 
marized as  follows:^ 

I.  The  governor  is  made  responsible  for  the  initiation  of  the 
budget. 

II.  Preparation  and  filing  of  estimates.  Estimates  are  re- 
quired to  be  made  by  all  spending  agencies  to  the  governor  at 
such  time  and  in  such  form  as  he  may  prescribe.  Estimates  of 
legislature  are  certified  by  presiding  officer  of  each  house  and 
those  of  judiciary  by  comptroller. 

III.  Review  and  revision  of  estimates.  Governor  may  re- 
view by  public  hearings  all  estimates  and  may  revise  all  esti- 
mates except  those  of  legislative  and  judiciary  departments  and 
those  relating  to  public  schools. 

IV.  Preparation  of  budget.  Governor  shall  prepare  two  bud- 
gets, one  for  each  of  the  ensuing  fiscal  years. 

V.  Form  and  contents  of  budget.  Each  budget  shall  be  di- 
vided into  two  parts: 

1.  "Governmental  appropriations"  including  estimates  of  ap- 
propriation for  (1)  general  assembly,  (2)  executive  department, 
(3)  judiciary  department,  (4)  to  pay  and  discharge  principal 
and  interest  of  state  debt,  (5)  salaries  payable  by  state  under 
constitution  and  laws,  (6)  public  schools,  (7)  other  pur- 
poses set  forth  in  constitution. 

2.  "General  appropriations,"  including  all  other  estimates. 
Each   budget  shall   contain   a   complete   plan  of   proposed   ex- 
penditures and  estimated  revenues,  and  shall  show  the  estimated 

(6)     New  York  Reconstruction  Commission's  Report,  334-335. 

45 


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surplus  or  deficit  of  revenues.  An  accompanying  statement  shall 
show:  (1)  revenues  and  expenditures  for  each  of  two  fiscal 
years  next  preceding,  (2)  balance  sheet,  (3)  debts  and  funds,  (4) 
estimate  of  state's  financial  condition  at  the  end  of  the  fiscal 
years  covered  by  budget,   (5)  explanations  by  governor. 

VI.  Suhmission  of  budget  and  consolidated  appropriation  hill 
to  Legislature.  Governor  shall  deliver  the  budgets  and  a  bill 
of  proposed  appropriations,  clearly  itemized  and  classified,  to  the 
presiding  officer  of  each  house  within  20  days  (if  newly  elected, 
30  days)  after  the  convening  of  the  legislature. 

VII.  Budgetary  procedure  in  legislature.  The  budget  bill  or 
appropriation  bill,  must  be  introduced  immediately  upon  receipt. 
The  governor  may  amend  or  supplement  the  bill  while  in  the 
legislature. 

Governor  and  administrative  officers  shall  appear  before  the 
legislature  to  defend  the  budget  bill. 

VIII.  Legislative*  action   on   consolidated   appropriation    hill.' 
Legislature  shall  not  amend  the  budget  bill  to  change  the  public 
school  funds,  or  salaries  and  obligations  required   by  the  con- 
stitution;  it  may  increase  or  decrease  items  relating  to  the  jud- 
iciary, but  can  only  reduce  or  strike  out  others. 

Legislature  shall  not  consider  other  appropriations  until  the 
budget  bill  has  been  finally  acted  upon. 

If  budget  bill  is  not  enacted  three  days  before  expiration  of 
regular  session,  the  governor  may  by  proclamation  extend  session. 

Budget  bill  becomes  law  upon  passage  of  the  legislature  with- 
out signature  of  governor. 

IX.  Supplementary  appropriation  hills.  Every  supplementary 
appropriation  shall  (1)  be  embodied  in  a  separate  bill,  limited 
to  a  single  purpose,  (2) shall  provide  the  revenues  necessary  to 
pay  the  appropriation  by  a  direct  or  indirect  tax,  (3)  shall 
receive  the  majority  vote  of  the  elected  members  of  each  house, 
(4)  shall  be  presented  to  the  governor  and  be  subject  to  his  veto. 

X.  Expenditure  and  control  of  appropriations.  Appropriations 
are  made  to  organization  units  in  lump  sum  with  itemized 
schedule  attached.  Each  lump  sum  appropriation  is  paid  out 
in  accordance  with  the  schedule  which  relates  to  it,  unless  and 
until  such  schedule  is  amended  by  action  of  the  governor  upon 
request  of  the  spending  agency.  (Budget  Bill,  Chap.  206,  Sec. 
3,  Laws  1918). 

Measured  by  its  adoption  in  other  states  the  Maryland 
budget  system  is  not  gaining  prestige.  Utah's  budget  law 
closely  follows  the  Maryland  provisions  except  that  an  amend- 
ment of  1921  creates  a  department  of  finance  and  budget  under 

48 


Tt^ 


the  governor  with  budget  and  supervisory  functions  like  those 
exercised  by  the  Illinois  department  of  finance.  A  Nevada  law 
of  1919  limited  the  legislature  to  striking  out  or  reducing  items 
in  the  governor's  budget  bill,  but  has  since  been  repealed.  The 
Indiana  legislature  of  1919  passed  a  joint  resolution  proposing 
a  constitutional  amendment  modelled  after  Maryland's  budget 
plan;  but  the  succeeding  legislature  refused  to  submit  this 
amendment  to  popular  vote.  In  New  Mexico  the  voters  recently 
rejected  a  constitutional  amendment  restricting  the  legislature 
to  striking  out  and  reducing  items  in  the  executive's  appropria- 
tion bill.  Alabama  and  West  Virginia,  with  administrative 
budget  boards,  follow  Maryland's  practice  governing  legislative 
increase  of  appropriation  bills  and  passage  of  supplementary 
appropriation  acts.  Montana,  also  having  an  administrative 
budget,  imposes  in  modified  form  Maryland's  restriction  upon 
supplementary  appropriations. 

« 

11.     Virginia  and  Belated  Group —  Delaware ,  Oklahoma,  South 
Carolina,  Wyoming,  North  Carolina,  Idaho  and  Florida 

Owing  to  the  prevalence  of  Virginia's  budget  system  in 
other  states  its  major  provisions  are  abstracted  below.'' 

I.  The  governor  is  responsible  for  initiation  of  the  budget. 

II.  Preparation  and  filing  of  estimates.  Estimates  shall  be 
made  by  all  spending  agencies  to  the  governor  upon  official  esti- 
mate blanks  by  November  1st  of  odd  numbered  years.  Esti- 
mate blanks  furnished  by  governor  shall  be  uniform  and  shall 
clearly  designate  information  desired.  Estimates  are  required 
in  itemized  form  showing  amount  needed  for  each  year  of  en- 
suing biennial  period  beginning  March  1st. 

Auditor  of  public  accounts  shall  furnish  governor  by  Decem- 
ber 1st  estimates  of  general  assembly,  certified  by  presiding 
officer  of  each  house,  also  estimates  of  judiciary,  as  provided 
by  law,  both  of  which  shall  be  itemized  in  accordance  with  the 
governor's  budget  classification. 

Auditor  of  public  accounts  shall  on  November  1st  furnish  gov- 
ernor with  (1)  statement  of  balance  to  credit  of  each  spending 
agency  at  the  end  of  last  preceding  appropriation  year,  (2) 
statement    of    monthly    expenditures    and    revenues    from    each 


(7)     New  York  Reconstruction  Commission's  Report,  358-359. 

40 


appropriation  account  during  last  preceding  appropriation  year, 

(3)  statement  of  annual  expenditures  and  revenues  from  each 
appropriation  account  for  each  of  last  two  appropriation  years, 

(4)  complete   balance    sheet    for    preceding    fiscal    year    ending 
September   30th,    (5)    other   statements   retiuested   by   governor. 

III.  Review  and  revision  of  estimates.  Governor  shall,  dur- 
ing November,  provide  public  hearings  for  review  of  all  esti- 
mates. 

Governor  may  require  additional  information  from  spending 
agencies  not  contained  in  estimates. 

Governor  and  his  assistants  by  December  1st,  biennially,  must 
have  completed  a  careful  survey  of  all  spending  agencies  which 
shall  be  a  basis  for  his  recommendations. 

Governor  may  revise  all  estimates  except  those  of  the  general 
assembly  and  the  judiciary. 

IV.  Preparation  of  budget.  Governor  shall  prepare  a  budget 
for  the  biennial  period. 

V.  Form  and  contents  of  budget.  Budget  shall  contain  a  com- 
plete and  itemized  plan  of  all  proposed  expenditures  for  each 
state  agency^  classified  by  function,  character  and  object,  also 
estimated  revenues  and  borrowings  for  each  year  of  the  en- 
suing biennial  period.  Opposite  each  item  of  proposed  expen 
ditures  the  budget  shall  show  in  parallel  columns  the  amounts 
appropriated  for  each  of  the  last  two  preceding  appropriation 
years,  and  the  increase  or  decrease.  Accompanying  the  budget 
shall  be  (1)  a  statement  of  revenues  and  expenditures  for  each 
of  the  two  preceding  appropriation  years,  (2)  a  current  balance 
statement,  (3)  a  debt  and  fund  statement,  (4)  a  statement 
of  condition  of  the  treasury  at  the  beginning  and  end  of  the 
two  appropriation  years  covered  by  the  budget,  (5)  a  balance 
sheet  for  state  at  close  of  last  preceding  fiscal  year  ending 
September  30th,  (6)  general  survey  of  state's  financial  and 
natural  resources,  with  a  review  of  its  general  economic,  indus- 
trial and  commercial  conditions. 

VI.  Submission  of  budget  and  consolidated  appropriation  bill 
to  legislature.  The  governor  shall  submit  to  the  presiding  officer 
of  each  house,  within  five  days  after  the  beginning  of  the  legis- 
lative session,  printed  copies  of  the  budget,  also  a  tentative  ap- 
propriation bill,  clearly  itemized  and  properly  classified  for  each 
of  the  ensuing  appropriation  years. 

VII.  Budgetary  procedure  in  legislature.  The  standing  ap- 
propriation committees  of  the  legislature  must  begin  within  five 
days  after  the  budget  is  submitted  to  hold  joint  and  open  ses- 
sions on  the  budget.  This  joint  committee  may  require  repre- 
sentatives of  spending  agencies  to  appear  before  it  and  give  in- 

60 


formation,  and  it  may  admit  and  hear  all  persons  interested  in 
the  estimates.  Governor,  or  his  representative,  and  the  gover- 
nor-el^t  shall  have  the  right  to  sit  at  these  public  hearings  and 
to  be  heard. 

VIII.  Legislative  action  on  consolidated  appropriation  bill. 
General  assembly  may  increase  or  decrease  items  in  the  budget 
bill. 

Further  and  special  appropriations,  except  in  the  case  of 
an  e;naergency,  can  be  made  only  after  the  budget  bill  has  been 
finally  acted  upon. 

IX.  Supplementary  appropriation  Mils.  All  appropriation 
bills  originating  in  the  legislature  must  conform  to  the  governor's 
budget  classification. 

Besides  allowing  legislative  increase  of  executive  proposals, 
Virginia's  budget  law  (1918)  differs  from  the  Maryland  amend- 
ment in  requiring  but  one  budget  for  the  biennial  period;  thie 
classification  of  proposed  expenditures  by  function,  character 
and  object;  and  joint  committee  hearings  on  the  budget.  Nor 
does  the  Virginia  procedure  include  lump  sum  appropriations 
to  organization  units,  with  itemized  schedule  attached,  as  pro- 
vided in  Maryland. 

Virginia's  budget  system  is  followed  very  closely  by  the 
executive  budget  laws  of  Delaware  (1921),  Oklahoma  (1919), 
South  Carolina  (1919),  and  Wyoming  (1919).  North  Carolina's 
budget  law  of  1919  also  resembled  Virginia's  but  was  largely 
nullified  by  an  amendment  of  1920  exempting  current  expenses 
of  the  legislative,  executive  and  judicial  departments  from 
budgetary  control.  In  Idaho  budgetary  procedure  in  the  legis- 
lature and  legislative  action  on  the  budget  bill  are  modelled 
after  the  Virginia  provisi)ns.  And  Florida,  under  an  admin- 
istrative budget  (1921),  accepts  the  Virginia  practice  governing 
the  preparation  and  filing  of  estimates,  form  and  contents  of 
the  budget,  budgetary  procedure  in  the  legislature,  and  legis- 
lative increase  of  administrative  proposals. 

///.     Illinois  and  Related  Group — Nebraska,  Utah,  Ohio,  Idaho 

and  Missouri. 

According  to  Cleveland  and  Buck,  the  executive  budget 
idea  was  most  fully  exemplified  in  American  law  and  practice 

51 


in.  1920  by  Illinois.^  And  W.  F.  Willoughby,  writing  in 
1918,  regarded  the  powers  and  duties  of  the  Illinois  department 
of  finance,  in  respect  to  the  preparation  and  presentation  of  a 
budget  and  collateral  matters,  as  the  furthest  advance  yet 
made  by  any  government  in  the  United  States  toward  the  adop- 
tion of  a  budgetary  system.^ 

The  Civil  Administrative   Code  of  1917  reorganizing  the' 
Illinois  statutory  departments  provides,  with  reference  to  the 
budget  i^^ 

I.  The  governor  who  appoints  the  director  of  finance  is  re- 
sponsible for  the  initiation  of  the  budget. 

II.  Preparation  and  filing  of  estimates.  The  director  of  fi- 
nance shall  by  September  15th  of  the  even  numbered  years  dis- 
tribute to  all  spending  agencies,  including  the  elective  officers, 
University  of  Illinois  and  judicial  department,  estimate  blanks 
in  such  form  as  he  may  prescribe.  He  shall  procure  information 
of  the  revenues  and  expenditures  for  the  two  fiscal  years  pre- 
ceding, the  appropriations  made  by  the  previous  legislature,  the 
expenditures  therefrom,  the  encumbrances  thereon,  amounts  un- 
encumbered and  unexpended,  estimates  of  the  revenues  and 
expenditures  for  the  current  fiscal  year,  and  estimates  of  reve- 
nues and  amounts  needed  by  the  several  spending  agencies  for  the 
succeeding  biennium. 

All  spending  agencies  shall,  not  later  than  November  1st,  file 
with  the  director  of  finance  their  estimate  of  receipts  and  ex- 
penditures for  the  succeeding  biennium.  Such  estimates  shall 
be  accompanied  by  written  explanations. 

III.  Review  and  revision  of -estimates .  The  director  of  finance 
may  approve,  disapprove  or  alter  the  estimates.  He  may  at  his 
discretion  make  inquiries  and  investigations.  He  shall  by  Jan- 
uary 1st  submit  to  the  governor  in  writing  his  estimates  of 
revenues  and  appropriations  for  the  next  biennium. 

IV.  Preparation  of  budget.  The  governor  shall  submit  to  the 
legislature  a  budget  for  the  biennial  period. 

V.  Form  and  contents  of  budget.  The  budget  shall  contain 
the  amounts  recommended  by  the  governor  to  be  appropriated  to 

(8)  Cleveland  and  Buck,  The  Budget  and  Responsible  Government, 
Macmillan,  1920,  p.  240. 

(9)  Willoughby,   W.   F.,   Movement   for   Budgetary   Reform   in   the 
States,  Appleton,  1918,  pp.  49-50. 

(10)  New  York  Reconstruction  Commission's  Report,  pp.  328-329. 

52 


the  several  spending  agencies,  the  estimated  revenues  from  taxa- 
tion and  from  sources  other  than  taxation,  and  the  estimated 
amount  required  to  be  raised  by  taxation.  Together  with  the  bud- 
get, the  governor  shall  transmit  the  estimates  of  receipts  and 
expenditures  received  by  the  director  of  finance  from  the  elec- 
tive officers  in  the  executive  and  judicial  departments  and  from 
the  University  of  Illinois. 

VI.  Submission  of  budget  and  consolidated  appropriation  bill 
to  legislature.  The  governor  shall  submit  to  the  general  assem- 
bly the  budget  not  later  than  four  weeks  after  its  organization*. 

VII.  Expenditure  and  control  of  appropriations.  Bach  de- 
partment shall,  before  an  appropriation  for  such  department  be- 
comes available  for  expenditure,  prepare  and  submit  to  the  de- 
partment of  finance  an  estimate  of  the  amount  required  for  each 
activity  to  be  carried  on,  and  accounts  shall  be  kept  and  reports 
rendered  showing  the  expenditures  for  each  such  purpose. 

Under  this  code  the  functions  of  the  department  of  finance 
are  -M 

(1)  To  prescribe  and  install  a  uniform  system  of  bookkeeping, 
accounting  and  reporting  for  the  several  departments; 

(2)  To  examine  into  the  accuracy  and  legality  of  accounts 
and  expenditures  of  other  departments; 

(3)  To  examine  and  approve  or  disapprove  all  bills,  vouchers 
and  claims  against  the  other  departments; 

(4)  To  prepare  a  budget  for  submission  to  the  Governor;  and 

(5)  To  formulate  plans  for  better  coordination  of  the  de- 
partmental work. 

The  director  of  finance  acts  as  the  financial  advisor  for  the 
governor  and  all  the  departments  under  his  control.  Through 
the  director  a  centralized  control  of  the  expenditures  made  by 
the  agencies  responsible  to  the  governor  is  effected.  While  the 
finance  department  has  no  direct  control  over  the  expenditures 
made  by  any  non-code  department,  it  is  authorized  and  required 
to  study  the  entire  field  of  governmental  needs  in  order  to  pre- 
pare the  budget. 

The  actual  work  of  preparing  the  Illinois  state  budget  is 
done  by  a  superintendent  of  budget  and  his  staff  under  the 
supervision  of  the  department  of  finance.    Both  of  these  officers 


(11)     Cleveland  and   Buck,   243-245. 

Si 


are  appointed  by  the  governor  with  senate  approval  for  a  four 
year  term,  beginning  on  the  second  Monday  in  January  following 
the  governor's  election. 

Unlike  Maryland  and  Virginia,  Illinois  has  recognized  the 
necessity  of  integrating  and  supervising  state  administration  to 
facilitate  budgetary  control.  The  Civil  Administrative  Code 
consolidated  over  one  hundred  executive  offices,  boards  and  com- 
missions into  nine  departments  with  directors  appointed  by  the 
governor. 

In  further  contrast  with  these  states,  Illinois  does  not 
require  the  governor  to  submit  a  budget  bill  or  bills  to  the  leg- 
islature. Neither  does  the  Code  provide  for  public  review  of  the 
estimates  by  the  governor,  or  for  appearance  of  the  governor  and 
administrative  officers  before  the  legislature  to  defend  the  budget 
estimates.  Again,  no  reference  is  made  to  budgetary  procedure 
in  the  Illinois  legislature.  The  budget  can  be  referred  to  regular 
committees  or  considered  by  the  legislative  bodies  sitting  as  a 
committee  of  the  whole.  The  general  assembly  has  the  power 
to  revise,  amend,  decrease,  increase  or  disregard  the  governor's 
recommendations  entirely,  subject,  however,  to  his  veto. 

The  Illinois  department  of  finance  is  the  model  for  budget- 
ary and  administrative  organs  in  five  other  states  having  an 
executive  budget.  In  1919  Nebraska  eliminated  eight  boards  and 
commissions  and  grouped  ten  departments  with  similar  func- 
tions into  six  main  divisions.  The  secretary  of  finance  was 
given  powers  like  those  of  the  Illinois  director  of  finance.  Sim- 
ilarly by  an  act  of  1921  Utah  created  a  department  of  finance 
and  purchase  under  the  governor  which  is  his  staff  agency  in 
the  preparation  of  the  budget,  and  also  has  wide  supervisory 
powers  over  all  of  the  state's  administrative  agencies.  No  gen- 
eral administrative  reorganization  was  attempted.  The  Ohio 
Administrative  Code  of  1921  repealed  the  budget  law  of  1913 
and  constituted  a  department  of  finance  with  the  usual  budget 
making  and  supervisory  administrative  powers.  Statutory  ad- 
ministrative agencies  were  reorganized  and  consolidated  into 
eight  departments.  Idaho  in  1919  replaced  forty-six  statutory 
boards,  commissions  and  other  administrative  offices  by  nine 
departments.     One  of  these  was  a  department  of  finance  like 

54 


I 


that  of  Illinois.  A  law  of  1921  establishes  a  bureau  of  budget 
and  taxation  to  assume  this  department's  budgetary  duties,  in- 
vestigate the  efficiency  of  state  departments,  and  formulate  plans 
for  their  better  coordination.  In  Missouri  a  law  of  1921,  subject 
to  a  referendum  in  1922,  provides  a  department  of  budget  un- 
der the  governor  which  acts  both  as  a  budget-making  agency  and 
instrument  of  general  administration. 

Washington — having  an  administrative  budget  board — con- 
solidated its  statutory  administrative  agencies  into  ten  depart- 
ments (1921).  The  director  of  efficiency  is  required  to  prepare 
the  biennial  statement  prescribed  by  law  as  the  basis  for  the 
state  budget;  and,  together  with  the  director  of  business  con- 
trol, enjoys  powers  and  duties  comparable  to  a  standard  depart- 
ment of  finance. 

IV.    Massachusetts 

The  essential  relation  between  administrative  reform  and 
budgetary  control  is  also  recognized  by  Massachusetts.  Follow- 
ing administrative  surveys  by  the  Economy  and  Efficiency  Com- 
mission appointed  in  1912,  by  its  successor — the  supervisor  of 
administration — created  in  1916,  and  by  a  joint  special  com- 
mittee on  finances  and  budget  procedure,  1917,  the  Massachusetts 
legislature  in  1919  adopted  an  Administrative  Consolidation  Act 
grouping  some  two  hundred  executive  and  administrative  agen- 
cies into  twenty  departments — the  maximum  number  fixed  by 
constitutional  amendment  in  1918.  Besides  preparing  the 
budget  for  the  governor,  the  supervisor  of  administration  ap- 
pointed by  the  governor  and  council  for  a  three  year  term,  is  em- 
powered to  make  current  efficiency  studies  of  the  organization 
and  operation  of  state  departments. 

By  constitutional  amendment  and  statute,  1918,  Massachu- 
setts has  established  an  executive  budget  system  as  outlined 
below  :^2 

I.  The  governor  is  responsible  for  initiation  of  the  budget. 

II.  Preparation  and  filing  of  estimates.     All  agencies  receiv- 
ing or  expending  money  from  the  treasury  shall  by  October  15th 


(12)     New  York  Reconstruction  Commission's  Report,  336-337. 

65 


annually  submit  to  the  supervisor  of  administration  estimates 
of  amounts  required  for  the  ensuing  fiscal  year,  with  explana- 
tions, citations  of  statutes  and  other  information;  also  state- 
ments showing  in  detail  the  amounts  appropriated  for  the 
current  fiscal  year.  These  estimates  shall  not  include  require- 
ments for  any  new  or  special  purposes  not  authorized  by  statute. 
Duplicate  copies  of  the  estimates  shall  be  filed  with  the  auditor 
of  the  Commonwealth. 

Spending  agencies  asking  for  the  expenditure  of  state  money 
from  any  source  of  revenue,  including  expenditures  to  be  met 
by  assessments  or  the  issuance  of  bonds  for  any  purpose  not 
covered  by  the  estimates  mentioned  in  Sec.  I  above,  shall  by 
October  15th  submit  requirements  therefor  in  detail  to  the 
supervisor  of  administration  together  with  such  other  informa- 
tion as  he  may  require. 

The  state  auditor  shall  by  December  26th  prepare  and  file 
with  the  clerk  of  the  house  and  with  the  supervisor  of  adminis- 
tration statements  showing  in  comparative  tabulations  the  es- 
timates filed  for  all  purposes  authorized  by  statutes,  including 
interests,  sinking  fund  and  serial  bond  requirements,  the  ap- 
propriations for  the  preceding  year  and  expenditures  for  all 
state  purposes  for  the  three  preceding  years.  He  shall  also 
file  his  estimates  for  the  ordinary  and  other  revenue  of  the 
state  in  comparative  tabulations  with  the  actual  revenue  for 
the  preceding  three  years,  together  with  a  statement  of  the 
free  and  unencumbered  casih  balance  and  other  resources  avail- 
able for  appropriation. 

III.  Review  and  revision  of  estimates.  The  supervisor  of  ad- 
ministration shall  review  the  estimates  and  shall  make  such 
investigations  as  are  necessary  for  the  preparation  of  the  bud- 
get. The  governor  may  call  upon  the  auditor  for  assistance  in 
the  preparation  of  the  budget. 

IV.  Preparation  of  budget.  For  the  purpose  of  preparing 
his  budget  the  governor  shall  have  power  to  require  any  spend- 
ing agency  to  furnish  him  with  any  information  that  he  may 
deem  necessary. 

V.  Form  and  contents  of  budget.  The  budget  shall  contain 
a  statement  of  all  proposed  expenditures  of  the  state  for  the 
fiscal  year,  including  those  already  authorized  by  law,  and  of 
all  taxes,  revenues,  loans  and  other  means  by  which  such  ex- 
penditures shall  be  defrayed.  The  budget  shall  be  arranged 
in  such  form  as  the  legislature  may  by  law  prescribe,  or  in  de- 
fault thereof,  as  the  governor  shall  determine. 

The  budget  shall  show  separately  estimates  and  recommenda- 
£ions   of   the   governor    for:      (1)     expenses   of    administration, 

56 


operation  and  maintenance;  (2)  deficiencies  or  over-drafts  in 
appropriations  of  former  years;  (3)  new  construction,  addi- 
tions, improvements  and  other  capital  outlay;  (4)  interest  on 
public  debt,  sinking  fund  and  serial  bond  requirements;  (5) 
all  requests  for  expenditures  for  new  projects  and  other  under- 
takings. It  shall  also  include  definite  recommendations  of  the 
governor  for  financing  the  expenditures  recommended  and  the 
relative  amounts  to  be  raised  from  ordinary  revenue,  direct 
taxes  or  loans. 

VI.  Submission  of  budget  and  consolidated  appropriation  bill 
to  legislature.  The  governor  shall  recommend  to  the  legislature 
a  budget  within  three  weeks  after  the  session  convenes. 

The  governor  shall  submit  to  the  legislature  such  supplemental 
data  with  reference  to  the  budget  as  he  may  deem  expedient,  and 
during  the  session  he  may  submit  supplemental  message  on  re- 
commendations relative  to  appropriations,  revenues  or  loans. 

VII.  Budgetary  procedure  in  legislature.  All  appropriations 
based  upon  the  budget  shall  be  incorporated  in  a  single  bill 
called  the  "general  appropriation  bill."  The  governor  may  from 
time  to  time  recommend  to  the  legislature  supplementary  budgets. 

VIII.  Legislative  action  on  consolidated  appropriation  bill. 
The  legislature  may  increase,  decrease,  add  or  omit  items  in 
the  budget.  It  may  provide  for  its  salaries,  mileage  and  ex 
penses  and  for  necessary  expenditures  in  anticipation  of  ap- 
propriations, but  before  final  action  on  the  "general  appropria- 
tion bill"  it  shall  not  enact  any  other  appropriation  bill  except 
on  recommendation  of  the  governor. 

IX.  Supplementary  appropriation  bills.  After  final  action  on 
the  general  appropriation  bill  or  on  recommendation  of  the 
governor,  special  appropriation  bills  may  be  enacted.  Such 
bills  shall  provide  specific  means  for  defraying  the  appropriations 
therein  contained. 

The    governor    may    disapprove    or    reduce    items    or    parts    of 
items  in  any  bill  appropriating  money. 

Massachusetts  like  Illinois  does  not  provide  public  hear- 
ings on  the  estimates  by  the  governor  or  executive  representa- 
tion at  legislative  or  committee  sessions  devoted  to  the  budget 
bill,  as  noted  in  Maryland  and  Virginia.  Unlike  Illinois,  Mas. 
sachusetts — as  is  the  case  in  Maryland  and  Virginia — requires 
the  governor  to  submit  a  consolidated  budget  bill.  Massachus- 
etts and  Virginia  differ  from  Illinois  and  Maryland  in  pre- 
scribing joint  legislative  committee  meetings  to  consider  the 
budget  bill.     With  reference  to  legislative  increase  of  items  in 

.    '  67 


the  budget  bill  Massachusetts'  practice  follows  Illinois  and  Vir- 
ginia. But  the  Massachussetts'  limitation  upon  the  passage 
of  special  appropriation  bills  resembles  the  Maryland  provis- 
ions. 

V.    New  Jersey  and  Kansas 

New  Jersey  paved  the  way  for  its  executive  budget  system, 
created  in  1916,  by  providing  for  a  single  appropriation  bill 
and  one  joint  committee  on  appropriations;  im^proying  its 
methods  of  accounting  and  auditing;  and  intregating  more  than 
twenty  separate  administrative  agencies  into  six  major  depart- 
ments with  heads  appointed  by  the  governor.  The  main  features 
of  New  Jersey's  budget  law  are:^^ 

I.  The  governor  is  held  responsible  for  initiation  of  the  budget. 

II.  Preparation  and  filing  of  estimates.  Estimates  prepared 
by  all  spending  agencies  on  prescribed  blanks,  giving  itemized 
lists  and  trial  balance,  and  presented  to  the  governor  on  Octo- 
ber 15th.  (As  amended  by  chapters  221  and  144,  Laws  of  1918,) 
Rules  1  to  8,  appended  to  law,  contain  a  budget  classification 
and  prescribe  the  form  of  the  estimate  sheets  in  detail. 

Each  estimate  must  he  sworn  to  by  the  administrative  head 
or  other  designated  officer  of  spending  agency  making  the  same. 

Estimated  revenues  furnished  governor  by  comptroller  and 
treasurer  jointly. 

III.  Review  and  revision  of  estimates.  Governor  shall  review 
all  estimates  and  determine  necessity  of  appropriations. 

He  may  conduct  hearings,  summon  witnesses,  and  make  in- 
vestigations. For  this  purpose  he  is  allowed  to  name  two  special 
assistants  and  to  call  upon  administrative  officers. 

IV.  Preparation  of  budget.  Governor  shall  prepare  a  sum- 
mary of  the  estimates  and  make  recommendations  thereon,  the 
total  of  which  shall  not  exceed  the  anticipated  revenues  of  the 
State. 

V.  Form  and  contents  of  budget.  The  budget  shall  be  in  the 
form  of  a  separate  message  to  the  legislature,  containing  a 
summary  of  the  estimates  and  reports  with  recommendations 
thereon. 

Budget  message  shall  be  in  easily  understood  form. 
.VI.     Submission  of  budget  and  consolidated  appropriation  bill 
to  legislature.     Governor  shall  submit  his  budget  to  the  legis- 
lature on  second  Tuesday  of  January. 


(13)     New  York  Reconstruction  Commission's  Report,  344-345. 

68       . 


Budget  given  such  publicity  as  is  deemed  wise. 

The  governor  may  transmit  special  messages  to  the  legislature 
requesting  additional  appropriations  after  budget  has  been  sub- 
mitted. 

VII.  Supplementary  appropriation  Mils.  It  is  the  intent  of 
the  budget  law  that  there  shall  be  no  supplemental,  deficiency  or 
incidental  bills. 

VIII.  Expenditures  and  control  of  appropriations.  No  money 
shall  be  drawn  from  the  state  treasury  except  by  the  general 
appropriation  act. 

Provides  for  transfers  within  appropriation  of  any  organiza- 
tion unit  by  application  to  the  state  house  commission,  composed 
of  the  governor,  comptroller  and  treasurer.  (As  amended  by 
chapter  290,  Laws  of  1918.) 

Governor  has  the  power  to  investigate  the  revenues  and  in- 
come of  spending  agencies,  which  are  not  derived. directly  from 
the  state  treasury. 

Without  substantial  administrative  reorganization  Kansas 
enacted  a  budget  law  in  1917  closely  following  that  of  New  Jer- 
sey. Kansa^s,  however,  lacks  a  single  appropriation  bill,  a  joint 
appropriations  committee,  an  adequate  budget  staff  and  a  system 
for  the  transfer  of  appropriations. 

• 
VI.  Miscellaneous  Group — 

Arizona,  Colorado,  Indiana,  Iowa,  Minnesota,  Mississippi,  New 

Hampshire  and  New  Mexico 

There  is  little  new  or  distinctive  in  the  executive  budget 
laws  of  Arizona,  Colorado,  Indiana,  Iowa,  Minnesota,  Missis- 
sippi, New  Hampshire  and  New  Mexico — states  without  any 
substantial  measure  of  administrative  consolidation.  In  gen- 
eral the  budget  provisions  of  these  states  are  less  comprehen- 
sive and  effective  than  those  previously  considered. 

Estimates  of  expenditures  and  revenue  are  made  to  the 
governor  in  all  states  of  this  group  except  Indiana,  where  esti- 
mates go  to  the  state  accountant,  and  New  Hampshire  where 
the  state  treasurer  receives  them.  Only  four  states — Colorado, 
Minnesota,  Mississippi  and  New  Mexico — specifically  authorize 
the  governor  to  review  and  revise  all  estimates,  except  those  of 
the  legislative  and  judicial  departments.     The  budget  is  pre- 

69 


pared  by  the  governor  in  all  of  these  states  except  Indiana  and 
New  Hampshire  where  the  state  accountant  and  treasurer,  re- 
spectively, formulate  it  for  the  governor.  Apart  from  Color- 
ado and  Indiana  no  adequate  provision  is  made  for  assistance 
to  the  governor  in  the  preparation  of  a  budget. 

In  each  state  the  governor  submits  a  budget  to  the  legis- 
lature covering  all  appropriations.  But  Iowa,  Minnesota,  Miss- 
issippi and  New  Hampshire  do  not  require  the  inclusion  of 
revenue  proposals.  Three  states  only — Arizona,  Colorado  and 
Indiana — prescribe  the  submission  of  a  budget  bill  or  bills  by 
the  governor.  In  New  Hampshire  the  appropriation  committee 
shall  report  to  the  legislature  one  appropriation  bill  unless 
the  governor  requests  the  making  of  appropriations  in  separ- 
ate acts.  Colorado  is  alone  in  giving  the  governor  and  admin- 
istrative officials  the  right  to  appear  and  be  heard  by  the  ap- 
propriations committees  of  either  house  of  the  legislature. 

None  of  these  states  limits  the  legislature's  power  over 
the  general  and  special  appropriation  bills  in  the  manner  of 
Maryland  or  Virginia.  Nor  has  any  state  made  effective  pro- 
visions for  the  speeding  up  of  legislative  procedure  on  appro- 
priation acts. 

Minnesota's  allotment  procedure  has  attracted  some  favor- 
able attention.  Each  department  shall  immediately  upon  an 
appropriation  for  its  support  being  made,  proceed  to  sub-ap- 
propriate or  allot  the  sum  so  granted  for  the  purposes  set 
forth  in  the  budget.  This  allotment  may  be  subsequently 
changed  upon  report  to  the  auditor  who  keeps  his  accounts 
under  the  established  allotment  heads. 

Administrative  Budget  Systems 
I.  California 

California's  budgetary  system  is  an  outgrowth  of  the 
general  movement  for  the  improvement  of  administrative  meth- 
ods in  that  state.  In  1911  there  was  established  the  state  board 
of  control  described  as  a  bureau  of  general  administration  and 
enjoying  plenary  powers  over  the  business  and  financial  affairs 
of  the  Commonwealth.  The  board  is  composed  of  three  full-time 
members  appointed  by  the  governor  and  holding  office  at  his 

60 


pleasure.  It  may  examine  the  books  of  all  spending  agencies; 
audit  claims  against  the  state  and  approve  or  disapprove  thein ; 
exercise  general  supervision  over  all  matters  concerning  the  fiscal 
and  business  policies  of  the  state ;  approve  contracts  for  the  pur- 
chase of  all  supplies ;  and  devise,  install  and  supervise  a  uniform 
system  of  accounting  and  reporting.     • 

Though  lacking  statutory  authority,  the  board  of  control 
has  by  mutual  agreement  with  the  governor  and  state  insti- 
tutions constituted  itself  and  the  comptroller  a  budget  board. 
Prior  to  the  legislative  session  all  spending  agencies  of  the  state 
file  their  requests  for  the  biennial  period  with  the  board  of  con- 
trol on  forms  prepared  by  it.  These  requests  are  audited  and  com- 
piled by  the  board's  department  of  public  accounting  and  then 
presented  to  the  budget  board  for  its  inspection.  Then  every 
department,  board,  commission  and  institution  is  represented  at 
the  hearings  of  the  budget  board  to  justify  every  item  contained 
in  their  requests.  After  the  conclusion  of  these  hearings  the 
budget  board  trims  the  estimates  to  amounts  deemed  necessary 
for  the  operation  of  each  spending  agency  for  the  ensuing  two 
year  period.  This  board's  final  recommendations  are  based  not 
only  on  the  evidence  at  its  hearings  but  upon  the  previous 
operating  expenses  as  shown  by  the  reports  filed  with  the  board 
of  control  or  ascertained  by  personal  visits  of  the  board  mem- 
bers to  the  state's  spending  agencies. 

By  law  the  state  board  of  control  must  make  its  recommend- 
ations for  appropriations  at  least  thirty  days  before  the  meet- 
ing of  the  legislautre.  These  recommendations  are  transmitted 
to  the  comptroller  who  in  turn  submits  them  to  the  governor 
and  each  member-elect  of  the  legislature  within  ten  days  of  the 
opening  of  each  regular  session.  The  printed  budget  recommend- 
ations are  without  supporting  details  or  adequate  comparison 
with  previous  biennial  periods.  Since  the  governor  appoints  the 
board  of  control  he  usually  accepts  the  budget  board's  recom- 
mendations as  his  own,  thus  giving  them  official  sanction  and 
force. 

Excepting  the  general  appropriation  bill,  no  bill  appropri- 
ating money  shall  contain  more  than  one  item  and  that  for  one 
single  and  certain  purpose  to  be  therein  expressed. 

61 


^.        Under  the  nominal  consolidation  of  its  administrative  units 
/t^lr  into  seven  departments  in  1921,  California  created  a  department 
L^-.f  "^^JL^f  finance  regularizing  the  procedure  of  the  infonnal  budget 
/^^       board.     The   work   of  this   department   is   divided   into   seven 
divisions — institutions,  budget  and  accounts,  purchases  and  cus- 
tody, printing,  motor  vehicles,   capitol  building  and  grounds, 
and  libraries  and  history.  .  The  chiefs  of  the  three  divisions  first 
named  constitute  the  governing  board   of  the   department   of 
finance ;  but  each  division  chief  is  in  charge  of  his  own  particular 
division.    In  this  connection  Governor  Stephens  said:^* 

"Certain  constitutional  requirements  concerning  the  Board  of 
Control  make  it  necessary  to  retain  nominally  this  board,  and 
therefore,  it  is  expressly  provided  that  these  three  chiefs  shall 
be  ex-offlcio  members  of  the  State  Board  of  Control.  The  reasons 
for  this  apparent  departure  from  the  principle  of  individual  de- 
partment control  are  certain  constitutional  provisions  dealing 
with  the  authorization  and  issue  of  bonds,  in  which  bond  issues 
the  specific  functioning  of  the  chairman  of  a  State  Board  of  Con- 
trol is  indispensable.  In  addition  board  action  is  required  for 
the  final  determination  of  the  state  budget,  a  duty  of  such  great 
importance  and  magnitude  that  in  my  judgment  it  would  be  more 
easily  and  equitably  performed  by  a  board  than  by  a  single  in- 
dividual." 

In  other  words,  a  state  budget  prepared  by  the  chief  of  the 
division  of  budgets  and  accounts  and  subject  to  the  final  det- 
ermination of  the  ex-offico  board  of  control  is  authorized  by  the 
act  creating  the  department  of  finance.  • 

II.  Connecticut 

In  Connecticut  the  budget  is  initiated  by  a  state  board  of 
finance.  It  is  composed  of  three  electors  appointed  by  the 
governor  with  over-lapping  terms  of  six  years,  the  comptroller 
and  tax  commissioner  (appointed  by  the  governor)  and  the 
treasurer,  ex-officio.  The  appointive  members  have  no  responsi- 
bility for  the  conduct  of  the  government  and  devote  little  time 
to  their  duties  for  which  they  receive  $500  per  year. 

y . 

(14)     Letter   from   Department   of  Research   and    Service,   Security 
Trust  and  Savings  Bank,  Los  Angeles,  August  25,  1921. 

62 


The  board  of  finance  holds  hearings  on  and  tabulates  the 
estimates  of  all  spending  officials,  which  together  with  the  board 's 
recommendations  thereon  are  printed  in  a  book  by  the  comp- 
troller. Since  the  governor  is  not  a  member  of  the  board  and 
does  not  always  completely  control  its  personnel,  as  in  California, 
he  is  virtually  eliminated  from  the  framing  of  budget  estimates. 
No  provision  is  made  by  law  for  the  form  and  contents  of  the 
budget  or  submission  of  the  budget  and  appropriation  bills  to 
the  legislature. 

There  is  a  joint  standing  committee  on  appropriations  in  the 
Connecticut  legislature;  but  reference  of  appropriation  bills  to 
this  committee  may  be  dispensed  with  by  two-thirds  vote  of  each 
house.  For  hearings  and  action  on  appropriation  bills  joint  meet- 
ings of  the  board  of  finance  and  appropriation  committee  are 
prescribed. 

Finally  the  board  of  finance  is  given  power  to  examine  and 
control  the  expenditures  of  departments  and  institutions. 

III.    Louisiana 

Under  a  constitutional  amendment  of  1916,  Louisiana's 
state  budget  is  initiated  by  a  board  of  state  affairs  consisting 
of  three  members  appointed  by  the  governor  and  confirmed  by 
the  senate  for  overlapping  terms  of  six  years. 

The  board  receives,  compiles  and  reviews  the  estimates  of 
all  spending  agencies,  and  obtains  additional  information 
through  examination,  interviews  and  correspondence.  It  pre- 
pares a  formal  printed  budget  containing  detailed  and  com- 
parative estimates  of  actual  revenues  and  expenditures.  This, 
together  with  the  board's  budget  recommendations  and  reasons 
therefor,  is  submitted  to  the  legislature.  The  only  participa- 
tion granted  to  the  governor  in  framing  a  financial  and  work 
program  is  that  he  may  have  included  in  the  budget  statement 
his  opinion  concerning  the  funds  that  should  be  granted. 

By  the  budget  law  of  1916  the  board  of  state  affairs  is 
also  empowered  to  investigate  (1)  duplication  of  work;  (2) 
central  control  of  institutions;  (3)  cost  of  state  printing;  (4) 
advisability  of  central  purchasing;   (5)   other  matters  pertain- 

63 


ing  to  economy  and  efficiency.  This  grant  of  .power  recognizes 
that  a  true  budgetary  system  involves  continuous  effort  to  pro- 
mote efficiency  of  administration. 

IV,    Texas 

In  Texas  the  budget  is  prepared  by  a  state  board  of  con- 
trol composed  of  tliree  citizens  appointed  by  the  governor  with 
the  senate's  approval  for  over-lapping  terms  of  six  years,  one 
being  appointed  every  two  years. 

Each  state  spending  agency  must  submit  itemized 
estimates  for  the  biennium;  to  the  board  of  control;  also  an 
itemized  account  of  expenses  for  the  preceding  two  years  in 
the  form  prescribed  by  the  board.  Upon  receiving  the  esti- 
mates the  board  investigates  and  considers  them  at  hearings 
and  obtains  pertinent  information  from  every  available  source. 

It  is  the  duty  of  the  board  to  frame  the  budget  which  is 
printed  and  mailed  to  members-elect  of  the  next  legislature, 
to  the  governor  and  to  heads  of  spending  agencies. 

The  board  of  control's  jurisdiction  is  not  confined  to  initia- 
tion of  the  biennial  budget.  It  is  organized  into  divisions  of 
public  printing;  purchasing;  auditing;  design,  construction  and 
maintenance;  estimates  and  appropriations;  and  eleemosynary 
institutions. 

In  the  nine  other  states  having  an  administative  budget 
the  governor  and  ex-officio  members  constitute  the  budget  board. 

V.     Washington 

Washington  consolidated  its  statutory  administrative 
agencies  into  ten  departments  in  1921,  establishing  a  director 
of  efficiency  to  prepare  the  biennial  budget  statement.  To- 
gether with  the  newly  created  director  of  business  control  he 
has  powers  and  duties  comparable  to  a  standard  department 
of  finance. 

This  budgetary,  statement  is  utilized  by  the  state  finance 
committee  in  making  its  budget  recommendations  to  the  legis- 
lature. The  governor,  state  treasurer  and  state  auditor  con- 
stitute this  committee. 

64 


VI,     West  Virginia 

West  Virginia  has  an  administrative  budget  board  consist- 
ing of  the  governor,  secretary  of  state,  auditor,  treasurer,  attor- 
ney general,  superintendent  of  schools  and  commissioner  of  ag- 
riculture (all  elective  officers),  which  is  responsible  for  initia- 
tion of  the  budget. 

Aside  from  the  substitution  of  a  budget  board  for  the  gov- 
ernor, the  West  Virginia  budget  amendment  is  practically  ident- 
ical with  that  of  Maryland.  A  further  variation  is  that  in 
West  Virginia  the  state  board  of  control  makes  up  the  appro- 
priation requests  for  state  institutions  submitted  to  the  bud- 
get board.  The  governor  appoints  the  three  members  of  this 
board  for  six  years  with  over-lapping  terms.  They  are  empow- 
ered to  manage  the  charitable  institutions  of  the  state  and  take 
charge  of  the  financial  and  business  affairs  of  the  educational 
institutions. 

VII,    Alabama 

In  Alabama  the  state  budget  commission  is  composed  of 
the  governor  as  chairman,  attorney  general  and  state  auditor. 
It  has  authority  to  secure  the  necessary  clerical  assistance. 

The  commission  prepares  a  budget  on  the  basis  of  itemized 
estimates  of  needs  and  revenues  submitted  by  spending  agencies 
in  the  form  prescribed  by  the  commission.  The  budget  con- 
tains a  complete  plan  of  proposed  expenditures  and  estimated 
revenues  for  the  ensuing  quadrennium.  It  is  transmitted  to 
the  legislature  by  the  governor  as  chairman  of  the  budget  com- 
miaigion,  together  with  executive  bills  for  all  proposed  appropri- 
ations clearly  itemized  arid  classified. 

The  house  and  senate  committees  in  charge  of  appropria- 
tion measures  sit  in  joint  public  meetings  to  hear  all  parties 
interested  in  the  budget  estimates.  Members  of  the  budget 
commission  may  be  present  and  heard  on  all  matters  coming 
before  the  committees. 

By  rule  of  procedure  the  legislature  will  alter  the 
budget  bill  except  to  strike  out  or  reduce  items,  unless  by  vote 
of  two-thirds  of  the  members  elected  to  both  houses,  provided 
that  appropriations  necessary  for  the  payment  of  interest  or 

66 


principal  due  on  public  debt  will  not  be  reduced  or  eliminated. 
This  practice  approaches  that  of  Maryland. 

Until  the  budget  bills  have  been  finally  acted  upon  by  the 
legislature,  neither  house  will  consider  any  other  appropria- 
tion except  an,  emergency  legislative  expense.  Every  supple- 
mentary appropriation  bill  is  restricted  to  a  single  purpose, 
and  is  not  valid  if  the  amount  added  to  appropriations  author- 
ized by  the  budget  bills  produces  an  excess  of  expenditures  over 
the  quadrennial  revenue  estimates  of  the  budget. 

VIII.  Florida 

A  Florida  law  of  1921  creates  a  state  budget  commission 
consisting  of  the  governor,  comptroller  and  state  treasurer. 

Virginia's  practice  is  adopted  for  the  preparation  and  the 
filing  of  estimates,  form  and  contents  of  the  budget,  and  legis- 
lative procedure  on  the  budget.  The  commission  shall  provide 
for  public  hearings  on  the  estimates  and  complete  a  careful  sur- 
vey of  all  spending  agencies.  It  prepares  a  biennial  budget 
for  submission  to  the  legislature  within  five  days  after  the 
beginning  of  the  session. 

IX,  Montana 

In  Montana  the  responsible  heads  of  all  state  spending 
agencies  submit  their  estimates  to  the  state  board  of  examiners, 
composed  of  the  governor,  secretary  of  state  and  attorney  gen- 
eral. 

The  board  passes  on  the  necessity  of  the  appropriations 
requested  and  submits  to  the  legislature,  ten  days  after  its 
convening,  a  printed  budget  containing: 

1.  Current  balance  sheet  of  state  finances; 

2.  Fund   statements; 

3.  The  revenues,  expenditures  and  balances  for  the  preced- 
ing biennial  period  and  the  estimated  revenues  and  expenditures 
for  the  succeeding  biennium; 

4.  Also  the  amounts  which  the  board  of  examiners  recommend, 
item  for  item,  with  columns,  showing  the  relation  between  the 
proposed  allowances  and  similar  grants  for  the  preceding  period, 
for  each  office  or  department,  with  explanatory  statements  from 

66 


each  office  or  department,  showing  their  reasons  for  any  requested 
increase,  and  statements  from  the  board  of  examiners  giving 
reasons  for  their  recommendations. 

Following  Maryland's  practice  a  budget  is  prepared  for 
each  fiscal  year,  and  appropriations  are  divided  into  ''govern- 
mental" and  "general".  The  legislature  also  acts  on  special 
appropriation  bills  under  restrictions  similar  to  those  of  Mary- 
land. . 

X.  Tennessee 

The  Tennessee  budget  commission  consists  of  the  governor 
as  chairman,  comptroller,  treasurer  and  secretary  of  state  (all 
elected  by  the  legislature)  and  the  auditor  (appointed  by  the 
governor).    It  may  provide  necessary  clerical  assistance. 

Each  agency  receiving  state  moneys,  except  educational 
boards  and  institutions,  shall  file  estimates  of  its  needs  and  rev- 
enues with  the  commission  arranged  in  the  manner  prescribed 
by  it.  At  the  same  time  the  governor  receives  from  the  comp- 
troller statements  covering  balances  to  the  credit  of  these  spend- 
ing agencies;  also  statements  of  monthly  and  annual  expendi- 
tures and  revenues  from  each  appropriation  account  during  the 
two  preceding  fiscal  years. 

The  board  for  the  administration  of  state  institutions  man- 
ages these  institutions,  formulates  their  budget  requirements  and 
purchases  supplies  for  them.  It  is  made  up  of  the  governor, 
treasurer  and  general  manager  of  state  institutions,  but  the 
governor's  control  of  the  board  is  made  effective  through  the 
fact  that  the  general  manager  is  appointed  by  the  governor  and 
removable  by  him  for  cause. 

The  commission  is  required  to  make  biennial  and  field  sur- 
veys of  state  agencies,  and  has  authority  to  secure  desired  inform- 
ation by  examination  of  witnesses  and  accounts.  It  shall  hold 
public  hearings  on  the  estimates  open  to  state  officers,  the  gover- 
nor-elect and  members  of  the  legislature;  and  may  revise  the 
estimates  according  to  its  judgment. 

A  tentative  budget  is  prepared  by  the  commission  con- 
taining comparative  summaries  showing  revenues  and  expendi- 

67 


tures,  reasons  for  increases  or  decreases,  definition  of  functions, 
and  any  suggestions  for  greater  efficiency  of  service.  It  also 
includes  the  commission's  estimates  for  emergency  purposes  and 
is  accompanied  by  the  original  estimates  submitted  to  the  com- 
mission. As  chairman  of  the  commission  the  governor  submits 
the  budget  to  the  legislature,  together  with  such  recommendat- 
ions for  appropriations  as  he  may  deem  proper. 

Legislative  committees  shall  consider  the  budget  in  joint 
public  sessions  at  which  all  interested  parties,  including  the 
budget  commission,  may  appear  and  be  heard. 

The  commission  supervises  the  expenditure  of  emergency 
appropriations  and  the  transfer  of  appropriations  within  a 
spending  agency. 

XI.    Michigan 

In  Michigan  the  newly  created  state  administrative  board 
(1921)  has  acquired  the.  powers  of  the  state  budget  commission. 
Members  of  this  board  are  the  governor,  chairman,  the  secretary 
of  state,  state  treasurer,  auditor  general,  state  highway  com- 
missioner and  superintendent  of  public  instruction. 

Spending  agencies  of  the  state  must  furnish  the.  board 
with  estimates  of  their  needs  and  anticipated  income  for  the  en- 
suing biennium,  and  other  financial  information  necessary  to 
preparation  of  the  budget.  The  board  is  authorized  to  examine 
the  books  and  records,  as  well  as  buildings  and  offices,  of  state 
spending  agencies. 

Having  assembled  the  estimates  the  board  shall  examine  and 
revise  them,  holding  public  hearings  before  final  revision  at 
which  any  executive  officer  of  the  state  government  has  a  right 
to  be  heard.  The  governor-elect  shall  be  invited  to  sit  with  the 
board  at  these  hearings.  He  may  examine  the  estimates  and 
make  recommendations  for  their  revision. 

The  governor  as  chairman  must  transmit  the  budget  pre- 
pared by  the  board  to  each  house  of  the  legislature  ten  days 
after  convening  of  thei  regular  session.  This  statement  shall 
show  the  estimated  amounts  required  by  all  spending  units  of 
the  state  government  for  each  year  of  the  ensuing  biennium, 
together  with  the  percentage  increases  and  decreases  from  ex- 


penditures  for  the  preceding  biennium  and  the  first  year  of  the 
current  biennium ;  an  estimate  of  the  state 's  revenues  for  the 
ensuing  two  year  period;  the  expenditures,  including  bills  due 
and  unpaid,  for  the  three  years  preceding  the  current  fiscal 
year ;  an  estimate  of  the  amount  needed  for  emergency  purposes, 
also  to  pay  the  interest  and  principal  of  the  state  debt. 

XII.     Oregon  , 

In  1921  the  Oregon  state  board  of  control  consisting  of  the 
governor,  secretary  of  state  and  state  treasurer,  was  made  the 
budget  commission  of  the  state.  It  is  authorized  to  appoint 
an  executive  officer  or  statistician  and  employ  further  assist- 
ance for  this  purpose. 

The  board  prescribes  appropriate  blanks,  forms  and  state- 
ments for  uniformly  furnishing  the  estimates;  and  may  hear 
or  require  the  officers  or  employes  of  any  agency  receiving  state 
funds  to  appear  before  it,  and  give  orally  or  in  writing  all  in- 
formation or  data  desired.  All  agencies  spending  state  funds 
must  furnish  the  commission  with  estimates  of  biennial  needs 
and  revenues.  By  law  the  board  may  examine  and  revise, 
increase  or  diminish  the  estimates  of  the  several  spending 
agencies. 

Statements  and  data  filed  with  the  commission,  together 
with  its  recommendations,  are  transmitted  to  the  secretary  of 
state.  These  are  compiled  and  printed  by  him  with  the  addi- 
tion of  comparative  data,  estimates  of  income  and  amounts  ap- 
propriated for  the  current  biennium.  The  governor  and  mem- 
bers of  the  legislature  receive  this  printed  compilation  prior  to 
the  opening  of  the  session. 

XIII.  Kentucky 

By  a  law  of  1918  Kentucky  established  a  budget  appro- 
priation commission  composed  of  the  governor  as  chairman,  state 
auditor  and  chairman  of  the  state  tax  commission. 

Every  agency  requiring  or  expending  money  from  the  state 
treasury  must  file  its  estimates  with  the  commission,  classified  by 
(1)  salaries,  (2)  maintenance  and  operation,  (3)  supplies,  (4) 
repairs  and  (5)  permanent  improvements. 

69 


After  review  of  the  estimates  the  commission  prepares  an 
appropriation  bill  for  each  of  the  two  ensuing  years,  including 
recommendations  for  all  spending  agencies  except  the  judiciary, 
legislature  and  common  schools.  The  budget  shall  include  a 
summary  statement  of  all  estimates;  show  the  source  of  income 
of  all  state  agencies;  also  the  expenditures  classified  under  (1) 
interest  charges,  (2)  salaries,  (3)  maintenance  and  operation,  (4) 
permanent  improvements,  and  (5)  number  of  employes.  It  is 
transmitted  to  the  legislature  together  with  the  budget  bills 
not  l^ter  than  the  third  Monday  after  the  beginning  of  the 
session. 

Summary 

Owang  to  the  lack  of  dominant  types  is  is  impossible  to  gen- 
eralize satisfactorily  upon  administrative  budget  systems  in  the 
states. 

California  and  Washington  are  the  only  states  that  have 
attempted  administrative  reorganization ;  and  they,  together  with 
Connecticut,  provide  for  efficiency  studies  of  state  adminis- 
tration; Louisiana,  Tennessee,  Texas  and  West  Virginia  have 
constituted  special  boards  to  introduce  business  methods  in  the 
conduct  of  state  institutions. 

The  governor  appoints  the  budget  boards  in  California, 
Connecticut,  Louisiana  and  Texas.  In  Alabama,  Florida,  Ken- 
tucky, Michigan,  Montana,  Oregon,  Tennessee,  Washington  and 
West  Virginia  the  budget  board  is  composed  of  ex-officio  mem- 
bers, always  including  the  governor.  By  complete  domination 
of  the  board  in  California,  by  executive  budget  bills  or  recom- 
mendations in  Alabama,  Louisiana  and  Tennessee,  and  by  con- 
trol over  the  administration  of  state  institutions  in  West  Vir- 
ginia and  Tennessee,  the  governor  may  wield  considerable  power 
over  budget  procedure  in  these  states. 

Special  assistance  in  the  preparation  of  the  budget  is  fur- 
nished to  the  boards  of  California,  Florida,  Oregon,  Tennessee 
and  Washington.  In  every  state  the  board  apparently  has  the 
power  to  revise  the  estimates  or  make  recommendations  thereon. 
Eight  states  specifically  require  or  authorize  the  budget  board 
to  hold  hearings  on  the  estimates — California,  Connecticut,  Flor- 

70 


ida,  Michigan,  Oregon,  Tennessee,  Texas  and  West  Virginia. 
The  board  generally  submits  its  budget  to  the  legislature.  How- 
ever^ in  Connecticut  the  comptroller  merely  prints  the  board's 
estimates;  and  in  Oregon  the  comptroller  compiles  the  board's, 
estimates  and  prints  them  with  other  data  for  distribution  to 
the  governor  and  legislature.  Barring  Tennessee,  the  budget 
estimates  cover  the  needs  of  all  spending  agencies;  but  they  are 
not  accompanied  by  recomriiendations  for  a  revenue  program. 

The  budget  laws  of  only  four  states — Alabama,  Florida, 
Kentucky  and  West  Virginia — require  the  board  to  submit  bud- 
get bills.  Aside  from  Alabama,  West  Virginia,  Florida,  pre- 
viously noted,  the  legislature  is  not  restricted  in  its  action  on 
appropriation  bills  or  budget  estimates  submitted  by  the  budget 
boards.  Connecticut  is  unique  in  its  joint  standing  committee 
on  appropriations.  Alabama,  Connecticut  and  Tennessee  per- 
mit members  of  the  budget  board  to  be  heard  at  the  joint  meet- 
ings of  the  legislative  appropriation^  committees.  In  West 
Virginia  and  Florida  the  governor  and  representatives  of  spend- 
ing agencies  may  be  heard  by  the  legislature  in  defense  of  their 
budget  requests. 

Administrative-Legislative  Budget  Systems 

I,     Wisconsin 

The  Wisconsin  state  board  of  public  affairs  is  the  oldest 
and  most  interesting  example  of  an  administrative-legislative 
budget  board.  It  is  composed  of  the  governor  as  chairman, 
secretary  of  state,  president  pro  tem  of  the  senate,  speaker  of 
the  house,  chairmen  of  the  senate  and  assembly  finance  com- 
mittees, and  three  members  appointed  by  the  governor  and 
confirmed  by  the  senate,  subject  to  removal  by  the  governor. 
The  board  employs  a  secretary  and  such  other  help  as  it  deems 
necessary. 

Essential  provisiions  of  the  Wisconsin  budget  procedure 
are  outlined  below  :^^ 

I.    Preparation  and  filing  of  estimates.     The  state  board  of 
public  affairs  shall  furnish  estimate  blanks  to  each  public  body, 

(15)     New  York  Reconstruction  Commission's  Report,  360-361. 

71 


not  later  than  July  1st.  Each  public  body,  not  later  than  Sep- 
tember ist,  shall  present  to  the  board  its  estimate  for  the  en- 
suing biennium. 

II.  Review  and  revision  of  estimates.  The  board  shall  cause 
the  estimates  to  be  compiled  forthwith  and  reviewed  through 
such  field  examinations,  interviews  or  correspondence  as  may  be 
necessary  to  obtain  full  information.  The  board  as  a  whole,  be- 
tween November  10th  and  December  1st,  shall  consider  and  re- 
view the  results  of  the  preliminary  examinations,  together  with 
the  estimates  and  explanations.  The  governor-elect  shall  have 
the  right  to  attend  review  meetings,  personally  or  through  a 
representative,  and  to  receive  all  reports  and  information  sent 
to  members  of  the  board. 

III.  P7'eparation  of  budget.    The  board  shall  prepare  a  budget. 

IV.  Form  and  contents  of  budget.  The  budget  shall  show 
comparisons  of  estimates  for  the  ensuing  biennium  with  each 
year  of  the  current  biennium  and  each  of  the  three  years  next 
preceding;  the  amount  of  each  item  recommended;  whether  the 
amounts  recommended  are  equal  to,  above  or  below  the  amounts 
requested  and  the  amounts  for  the  first  year  of  the  preceding 
biennium;  reasons  for  recommended  allowances  or  disallowances; 
a  record  of  the  vote  on  each  recommendation  that  is  not  unani- 
mous; and  any  recommendation  which  a  minority  of  the  board 
or  the  governor-elect  may  wish  to  have  included.  The  board  shall 
accompany  the  conclusions  or  recommendations  of  all  its  reports 
with  a  summary  of  the  facts  upon  which  its  conclusions  or  find- 
ings are  based,  the  names  of  the  members  approving  the  report, 
and  the  summary  of  the  investigation  pursued  to  obtain  the 
facts.  Three  budgets  are  prepared  for  each  public  body;  for 
icapital,  maintenance  and  operation. 

V.  Submission  of  budget  and  consolidated  appropriation  bill 
to  legislature.  The  board  shall  recommend  a  budget  to  the  leg- 
islature not  later  than  December  15th;  and  not  later  than  Janu- 
ary 1st  shall  distribute  copies  of  the  estimates  with  its  recom- 
mendations thereon  to  the  members  of  the  legislature. 

VI.  Budgetary  procedure  in  legislature.  The  financial  com- 
mittees of  the  two  houses  of  the  legislature  act  jointly,  a  pro- 
cedure similar  to  that  of  New  Jersey.  Usually  this  joint  com- 
mittee on  finance  introduces  from  twelve  to  twenty  regular  ap- 
propriations bills,  separating  the  grants  to  individual  depart- 
ments. 

VII.  Expenditure  and  control  of  appropriations.  The  board 
shall  have  such  supervision  of  every  public  body  as  is  necessary  to 
secure  uniformity  and  accuracy  of  accounts  and  it  may  devise 
uniform  systems  of  accounts  and  uniform  accounting  procedure 
for  all  such  public  bodies. 

72 


The  board  shall  also  investigate  duplication  of  work,  ineffi- 
ciency of  the  organization  and  administration,  and  shall  formul- 
ate plans  for  greater  coordination  and  the  improvement  of  ad- 
ministration in  general. 


Like  the  California  board  of  control  and  the  Illinois  depart- 
ment of  finance,  the  Wisconsin  state  board  of  public  aifairs  is 
both  an  organ  of  budgetary  control  an^i  general  administration 
But  unlike  California  and  Illinois,  Wisconsin  has  adopted  the 
idea  of  ''government  by  commission"  and  set  its  face  resolutely 
against  integration  of  state  administration. 

' '  The  board  form  of  government,  as  it  is  being  developed  in 
Wisconsin,  has  been  in  the  direction  of  removing  from  the  gover- 
nor his  power  and  control  over  the  state  administration.  The 
members  of  these  boards  have  in  practically  all  cases  over-lapp- 
ing terms  which  are  very  much  longer  than  the  two  year  term 
of  the  governor.  The  result  is  that  the  governor  can  never  con- 
trol the  boards,  because  he  can  not  appoint  a  majority  of  the  mem- 
bers during  his  short  term  of  office.  More  than  this,  all  appoint- 
ments made  by  the  governor  must  be  approved  by  the  senate. 
Since  the  legislature,  under  the  Wisconsin  plan,  is  the  controlling 
factor  in  matters  of  administration,  in  so  far  as  control  may  be 
exercised  at  all,  and  the  board  of  public  affairs  is  the  controlling 
body  in  budget  making,  the  governor  can  do  nothing  more  than 
nominate  to  office  those  persons  who  stand  well  in  the  favor  of 
the  senate  and  exert  an  infiuence  in  the  preparation  of  an  ad- 
ministrative and  financial  program  for  the  state. 

"In  financial  matters  the  governor  has  very  littie  power. 
He  may  concur  with  or  dissent  from  the  proposals  of  other 
members  of  the  board  of  public  affairs  (all  excepting  three  of 
which  are  elective  like  himself)  in^preparing  budget  recommend- 
ations which  are  made  to  the  legislature.  Even  then  the  legis- 
lature may  disregard  his  recommendations  altogether  -and  not 
even  discuss  them.  He  msiy  then  send  special  messages  to  the 
legislature,  as  Governor  Philipp  did  last  year  (1919),  calling  at- 
tention to  the  mounting  appropriations  and  urging  the  legis- 

73 


lature  to  curb  its  action.  Finally  he  has  the  power  of  veto, 
which,  however,  under  the  system  of  continuing  appropriations 
may  amount  to  little.''^® 

II.  North  Dakota,  South  Dakota  and  Vermont    ■ 

The  state  budget  board  of  North  Dakota  is  composed  of  the 
governor  as  chairiiian,  state  auditor  as  secretary,  attorney  gen- 
eral and  chairmen  of  the  senate  and  house  appropriations  com- 
mittees of  the  preceding  legislature.  Provision  is  made  for  the 
board's  employment  of  necessary  accountants,  clerks  and  sten- 
ographers. 

Each  even  year,  not  later  than  October  1,  the  heads  of 
spending  agencies  submit  estimates  of  their  requirements  to  the 
auditor,  on  blanks  prepared  by  hmi,  with  statements  and 
data  necessary  to  explain  fully  the  need  and  purpose  of  each 
request. 

These  estimates  are  transmitted  by  the  auditor  to  the  bud- 
get board  on  the  third  Tuesday  in  November.  The  board  there- 
upon examines  such  estimates,  affording  opportunity  for  expla- 
nations and  public  hearings  whenever  requested  or  upon  its 
own  initiative.  If  considered  advisable,  the  board  or  anv  mem- 
ber  of  it  may  visit  and  investigate  any  agency  requesting  an 
appropriation. 

Not  later  than  the  tenth  day  of  the  session,  the  budget  board 
submits  its  estimates  for  a  state  budget  to  the  legislature.  Such 
estimates  include  the  board's  reasons  for  specific  recommend- 
ations covering  maintenance  of  the  state  government;  the  re- 
quirements for  interest  and  sinking  fund  charges  upon  the  basis 
of  estimates  furnished  by  the  auditor ;  an  estimate  of  the  state 's 
revenues ;  and  a  statement  of  unexpended  balances  in  appropri- 
ation accounts  with  recommendations  for  their  disposition. 

"The  South  Dakota  (budget)  act  is  almost  a  literal  copy 
of  that  of  North  Dakota,  and  the  Vermont  act,  though  differently 
worded,  is  based  upon  essentially  the  same  principles.  All  three 
acts  prcJvide  for  the  formulation  of  a  budget  by  a  permanent 
body,  known  as  a  State  Budget  Board  in  the  case  of  the  two 


(16)     Cleveland  and  Buck,  p.  256. 

74 


Dakotas,  and  a  Committee  on  Budget  in  the  ease  of  Vermont, 
composed  of  the  chairmen  of  the  finance  committees  of  the  two 
houses,  the  Governor  and  certain  administrative  officials.  These 
bodies  have  adequate  power  to  secure  from  administrative  ser- 
vices reports,  financial  statements  and  estimates  in  the  form  des- 
ired by  them  and  to  employ  technical  and  other  assistance 
needed  by  them  for  the  performance  of  their  work. 

' '  It  will  be  remarked  that  in  all  four  of  these  cases  the  Gov- 
ernor is  a  member  and  the  chairman  of  the  board  or  committee. 
Though  the  principle  of  having  the  budget  represent  a  financial 
and  work  program  emanating  from  a  responsible  chief  execu- 
tive is  not  carried  into  effect  by  these  acts,  opportunity  never- 
theless is  given  to  the  governor  through  his  position  on  this  body 
to  bring  forward  and  press  his  own  administrative  and  work 
program.  The  creation  of  these  bodies  is  also  of  signifiance  as 
representing  the  effort  to  bring  the  legislative  and  executive 
branches  of  the  government  into  closer  working  relations  with 
one  another  than  has  been  the  case  in  the  past.^'^"^  Certain 
members  of  the  budget  board  sit  in  the  legislature  and  are  always 
on  hand  to  defend  and  explain  their  recommendations. 

Under  the  law  the  Vermont  budget  committee  like  the  Wis- 
consin state  board  of  public  affairs  can  function  as  a  permanent 
commission  on  economy  and  efficiency.  It  is  also  authorized  to 
make  provision  for  emergencies,  all  emergency  grants  being  re- 
ported to  the  auditor  and  included  in  the  budget  for  the  next  bi- 
ennial fiscal  period.  The  provision  for  a  single  consolidated  ap- 
propriation act  makes  it  possible  for  officials  of  the  Vermont 
government  and  the  public  generally  to  determine  readily  what 
appropriations  have  been  made. 

777.    Maine 

There  is  nothing  new  or  distinctive  in  the  present  budget 
law  of  Maine,  which  follows  the  informal  procedure  instituted 
by  Governor  Milliken  in  1917. 


(17)     Willoughby,  pp.  180-181. 

76 


IV,    North  Carolina  and  Georgia 

Apart  from  its  establishment  of  a  budget  commission  the 
North  Carolina  budget  law  closely  follows  that  of  Virginia. 
However,  North  Carolina's  budgetary  procedure  will  not  be 
detailed,  since  it  has  been  largely  nullified  by  an  amendment 
of  1921  exempting  current  expenses  of  the  legislative,  execu- 
tive and  judicial  departments  from  budgetary  control.  And 
owing  to  its  scant  provisions,  examination  of  the  Georgia  budg- 
get  law  is  unnecessary  and  fruitless. 

y.    New  York 

Superimposed  on  New  York's  legislative  budget  system,  es- 
tablished in  1916,  is  the  board  of  estimate  and  control  created 
in  1921  by  an  amendment  to  the  state  finance  law.  This  board 
is  made  the  central  agency  in  the  modified  budget  procedure. 
It  is  an  ex-officio  body  consisting  of  the  governor,  chairman  of 
til 8  finance  committee  of  the  senate,  chairman  of  the  ways  and 
means  committee  of  the  assembly  and  the  state  comptroller. 
The  governor  is  chairman  but  the  board  shall  elect  a  tempor- 
ary chairman  from  among  its  other  members  to  preside  in  his  ab- 
sence. Deputies  or  assistants  in  their  regular  office  force  may  rep- 
resent or  act  for  the  members  of  the  board  at  any  meeting.  The 
board  may  also  employ  experts  and  other  assistants  who  shall 
be  exempt  from  the  provisions  of  the  civil  service  law  *' because 
of  the  confidential  character  of  their  work." 

Annually,  on  or  before  a  date  to  be  fixed  by  the  board  of 
estimate  and  control,  there  shall  be  filed  with  the  board  and 
legislative  budget  committee  by  each  state  officer,  board  or  com- 
mission, head  of  department  and  proper  officer  of  each  state 
institution,  a  statement  in  detail  of  all  moneys  for  which  an  ap- 
propriation is  desired  at  the  ensuing  session  of  the  legislature, 
with  the  reasons  therefor. 

On  or  before  December  31,  of  each  year,  following  its 
examination  and  investigation  of  appropriation  requests,  the 
board  shall  cause  to  be  prepared  and  filed  with  the  ibudget  sec- 
retaries of  the  finance  committee  of  the  senate  and  the  ways  and 
means  committee  of  the  assembly  a  statement,  addressed  to  the 

76 


legislature,  of  the  total  amount  of  appropriations  desired  by 
each  state  officer,  board,  commission,  head  of  department  or 
officer  of  a  state  institution;  and  a  tabulated  statement  of  all 
items  of  such  desired  appropriation  which  are  affected  by  a 
revision  adopted  and  recommended  by  the  board,  together  with 
a  statement  of  such  revision,  item  by  item,  or  of  any  compre- 
hensive readjustment  of  all  appropriations  for  any  office,  de- 
partment or  institution  as  a  substitute  for  all  or  any  of  the 
items  originally  requested.  With  such  statement,  the  board 
shall  submit  an  estimate  of  the  probable  revenues  of  the  state 
for  the  ensuing  fiscal  year.  Before  completing  the  annual  bud- 
get, provided  for  in  the  legislative  law,  the  finance  committee 
of  the  senate  and  ways  and  means  committee  of  the  assembly 
shall  examine  and  pass  upon  the  recommendations  of  the  board 
contained  in  such  tabulated  statement. 

The  state  finance  law  of  1916  is  not  repealed;  so  the  three 
budget  agencies  constituted  thereunder — the  governor,  the  joint 
legislative  budget  committee  and  the  comptroller — will  to  a 
degree  parallel  the  functions  of  the  board  of  estimate  and  con- 
trol. 

Members  of  the  senate  finance  and  assembly  ways  and 
means  committees  compose  the  joint  legislative  budget  committee. 
In  1919  the  senate  finance  committee  had  sixteen  members  and 
the  assembly  ways  and  means  committee  fifteen.  The  chairman 
of  each  committee  appoints  a  clerk,  a  stenographer  and  an  ac- 
countant to  assist  the  committees  which  continue  during  recess 
of  the  legislature. 

The  state  spending  agencies  file  their  requests  with  the  joint 
legislative  budget  committee  and  the  board  of  estimate  and  con- 
trol; also  with  the  state  comptroller,  by  November  15. 

A  consolidated  tabulation  of  estimated  expenditures  and  in- 
come, together  with  actual  appropriations  and  expenditures  dur- 
ing the  preceding  fiscal  year,  shall  be  transmitted  by  the  comp- 
troller to  the  governor  by  December  15,  and  to  the  legislature 
on  the  opening  day  of  the  session.  The  comptroller  also  presents 
to  the  legislature  by  February  1,  of  each  year  a  report  of  ex- 
penditures for  the  last  six  months  of  the  current  fiscal  year. 

77 


The  governor  shall  annually  within  one  week  after  the  con- 
vening of  the  legislature  submit  to  the  houses  a  statement  of 
the  total  amount  of  appropriations  desired  by  each  state  spend- 
ing agency,  and  may  make  recommendations  thereon.  He  may 
also  accompany  this  statement  with  an  estimate  of  the  probable 
revenues  of  the  state. 

Budget  requests  are  examined  by  sub-committees  of  the  joint 
legislative  budget  committee;  and  its  clerks  are  required  to  re- 
ceive and  tabulate  estimates  and  to  compile  other  budget  data 
for  the  chairmen.  During  the  summer  and  fall  of  each  year  the 
budget  clerks  and  chairmen  of  the  finance  committees  visit  all 
institutions  and  departments  of  the  state. 

In  practice  the  senate  finance  committee  and  the  assembly 
ways  and  means  committee  act  jointly  in  preparing  an  annual 
budget.  It  shall  specify  the  unit  of  organization  under  whose 
control  or  supervision  moneys  appropriated  shall  be  expended  and 
the  purpose  for  which  appropriations  are  made.  It  shall  contain 
a  detailed  estimate  of  the  probable  revenues  of  the  state  and  an 
estimate  of  the  amounts  which  it  shall  be  necessary  to  raise 
by  direct  taxation.  Not  later  than  March  15,  the  legislative 
budget  committee  shall  present  to  their  respective  houses  with 
the  budget  a  single  bill  providing  the  appropriations  recommen- 
ded in  the  budget. 

The  appropriation  bill  when  reported,  shall  be  referred  to 
the  committee  on  the  whole  of  the  senate  and  advanced  to  the 
order  of  second  reading  in  the  house,  and  shall  thus  remain  live 
full  legislative  days,  on  each  of  which  it  shall  be  the  special  order 
of  the  day.  These  legislative  sessions  are  open  to  the  public. 
And  at  this  time  the  h^ad  of  any  spending  agency  may  and, 
upon  request  by  majority  vote  of  either  house,  shall  appear  to 
answer  questions  pertaining  to  his  appropriation. 
fc  While  the  appropriation  bill  has  this  special  legislative  stat- 
us, it  mky  be  amended  by  introducing  additional  items  or  by  in- 
creasing, reducing  or  eliminating  the  items;  but  on  third  read- 
ing no  amendment  except  to  reduce  or  eliminate  an  item  shall 
be  in  order  only  by  unanimous  consent.  Scores  of  special  appro- 
priation bills  are  introduced  at  this  point.  All  grants  of  funds 
are  highly  and  rigidly  itemized. 

78 


Although  responsibility  for  New  York's  state  budget  has 
been  scattered  in  the  past,  the  joint  legislative  budget  com- 
mittee— or  rather  the  chairmen  and  clerks — have  controlled  the 
formulation  of  the  budget.  Both  houses  pass  the  budget  prac- 
tically as  submitted  to  them  by  the  chairmen  of  the  joint  com- 
mittee. The  legislature  is  free  to  disregard  the  governor 's  recom- 
mendations, leaving  as  his  only  recourse  the  constitutional  right 
of  veto.  The  chief  value  of  the  comptroller's  work  in  prepar- 
ation of  the  budget  is  his  estimate  of  the  state's  antici- 
pated revenues.  He  has,  however,  complete  control  over  author- 
ization of  expenditures  and  reclassification  of  appropriations. 

Establishment  of  the  board  of  estimate  and  control  will  tend 
to  unify  responsibility  for  New  York's  state  budget,  but  it  will 
also  strengthen  the  standing  committee  domination  of  the  legis- 
lative and  administrative  branches  of  the  state  government  in 
budget  making  and  execution. 

Besides  passing  upon  all  appropriation  requests,  the  board 
must  estimate  the  state's  revenues  and  approve  schedules  of 
positions  and  salaries  before  lump  sum  appropriations  are 
available  for  personal  service.  These  requirements  impair  the 
individual  budget  functions  of  .the  comptroller  who  is  a  member 
of  the  board.  And  the  governor's  membership  on  the  board 
will  further  weaken  his  recommendations  to  the  legislature  cov- 
ering annual  appropriations.  At  any  rate  the  governor  and 
comptroller  will  be  too  busy  to  function  most  of  the  time;  so 
the  board  will  be  dominated  by  the  chairmen  of  the  legislative 
finance  committees,  who  in  their  dual  capacity  are  also  mem- 
bers of  the  joint  legislative  budget  committee,  which  must 
pass  on  the  recommendations  of  the  board  before  completing 
the  annual  legislative  budget. 

By  domination  of  the  board  the  legislature  also  gains  sub- 
stantial control  over  the  organization  and  operation  of  state 
administration.  The  board  of  estimate  and  control  shall  make 
studies  to  ascertain  all  instances  of  waste  and  duplication  in 
each  department  and  to  determine  what  department,  offices, 
institutions  or  functions  may  be  discontinued  or  transferred  in 
the  interest  of  economy  and  public  welfare.  Where  plans  for 
improved  methods  of  operation  determined  upon  by  the  board 

79 


do  not  require  legislation  to  put  them  into  effect,  the  depart- 
ment affected  must  carry  out  the  board's  recommendations, 
except  in  the  case  of  constitutional  offices.  Where  legislation  is 
necessary,  the  recommendation  of  the  hoard  is  to  be  submitted 
to  the  legislature ;  and  if  such  plan  is  to  be  accomplished  in  whole 
or  in  part  by  the  annual  appropriation  bill,  the  board  shall  re- 
vise estimates  accordingly.  Investigations  of  governmental  or- 
ganization in  other  states  may  be  made.  The  board  is  also  made 
the  purchasing  and  printing  agency  of  the  state. 

Legislative  Budgei  Systems 

With  the  establishment  of  the  New  York  board  of  esti- 
mate and  control,  Arkansas  becomes  the  only  state  operating 
by  law  under  a  legislative  budget  system. 

The  budget  law  of  Arkansas  requires  the  biidget  to  be  pre- 
pared by  a  special  committee  consisting  of  seven  members  of 
the  house  appointed  by  the  speaker  and  five  members  of  the 
senate  appointed  by  the  president.  Although  the  law  directs 
the  state  auditor  to  gather  the  biennial  estimates  and  to  com- 
pile them  for  this  committee,  the  state  comproller  has  recently 
discharged  these  functions. 

Not  later  than  twenty  days  after  its  appointment,  the 
budget  committee  shall  prepare  and  introduce  into  the  general 
assembly  all  appropriation  bills  for  the  necessary  running  ex- 
penses of  the  state  government  including  all  state  intitutions. 
It  shall  make  such  recommendations  by  bill,  or  otherwise,  for 
changes  in  the  state  revenue  laws  as  may  be  deemed  necessary 
to  raise  sufficient  funds  for  the  state's  needs. 

Though  lacking  any  legal  budgetary  procedure,  Pennsyl- 
vania and  Rhode  Island  in  practice  have  a  legislative  budget 
system.  In  both  states  it  is  customary  for  legislative  commit- 
tees to  assemble  whatever  budget  information  is  desired  and  to 
make  recommendations  to  the  legislature  for  appropriations. 

Summary  of  Budget  Procedures 

Despite  the  varying  provisions  previously  noted,  it  is  pos- 
sible to  generalize  somewhat  on  budget  procedure  in  the  states. 
Nearly  all  of  the  states  require  the  responsible  heads  of 

80 


state  spending  agencies  to  submit  detailed  written  estimates  of 
expenditures  and  revenues  to  the  budget  making  authority  on 
a  fixed  date,  usually  in  November.  Except  in  a  few  cases  the 
budget  laws  or  amendments  do  not  specify  the  information  to 
be  included  in  the  estimates,  thus  giving  the  budget-making 
authority  a  free  hand  in  shaping  the  estimate  forms  to  chang- 
ing conditions  and  the  classified  data  desired  for  the  budget 
statement  and  accompanying  appropriation  bills. 

As  a  rule  the  state  auditor  or  state  comptroller  is  required 
to  prepare  and  file  estimates  of  revenues  with  the  budget-mak- 
ing authority. 

While  practically  all  of  the  states  require  the  budget-mak- 
ing authority  to  review  the  estimates,  less  than  one-half  of  the 
states  expressly  empower  this  authority  to  revise  the  estimates 
in  preparing  the  budgret.  *'In  most  cases  certain  estimates  are 
specifically  excluded  from  the  exercise  of  the  power  of  revision 
on  the  part  of  the  budget-making  authority.  Only  in  Mass* 
achusetts,  Mississippi,  New  York,  Tennessee  and  Vermont  iy 
the  budget-making  authority  given  the  power  to  revise  all  esti' 
mates.  In  Colorado,  New  Mexico,  Oklahoma,  South  Carolina 
and  Virginia  the  budget-making  authority  may  revise  all  esti? 
mates  except  those  of  the  legislature  and  the  judiciary ;  in  Mary- 
land and  West  Virginia  it  may  revise  all  estimates  except  those 
of  the  legislature,  the  judiciary,  and  the  public  schools ;  in  Min* 
nesota  it  may  revise  all  except  the  estimates  of  the  legislature^ 
the  judiciary,  the  state  university,  and  the  state  militia ;  in  Nev- 
ada and  Utah  all  except  estimates  relating  to  the  legislature^ 
public  debt  obligations,  and  fixed  salaries;  and  in  Wyoming  ali 
except  the  legislative  estimates.  In  Illinois  and  Nebraska  the 
head  of  the  finance  department  is  given  the  power  to  approve, 
disapprove,  or  alter  the  estimates  of  the  code  departments  be- 
fore submitting  them  to  the  governor  for  executive  consideration 
and  recommendations.''^^ 

Frequently  lack  of  an  adequate  staff  handicaps  the  budget- 
making  authority,  at  its  discretion  or  upon  request,  may  hold 
most  one-half  of  the  states  have  made  no  specific  provision  for 

(18)     Buck,  A.  E.,  Budget  Making,  Appleton,  1921,  pp.  109-110. 

w 

81 


effective  assistance  in  formulation  of  the  budget.  Notable  ex- 
ceptions to  this  practice  are  found  in  Arizona,  California,  Col- 
orado, Florida,  Idaho,  Illinois,  Indiana,  Massachusetts,  Nebraska, 
New  Jersey,  New  York,  Ohio,  Oklahoma,  Oregon,  South  Caro- 
lina, Tennessee,  Utah,  Virginia,  Washington,  Wisconsin  and 
Wyoming.'  But  few  of  these  states  supply  a  staff  agency  foi 
field  investigation  of  spending  agencies. 

Under  the  law  budget-making  authority  in  seven  states 
shall  hold  public  hearings  on  the  estimates  in  preparing  the 
budget — Idaho,  Maine,  Oklahoma,  South  Carolina,  Tennessee, 
Virginia  and  Wyoming.  In  twelve  other  states  the  budget- 
making  authority  in  the  review  and  revision  of  estimates.  Al- 
such  hearings — Colorado,  Connecticut,  Kansas,  Maryland,  New 
Jersey,  Newi  Mexico,  Nevada,  North  Dakota,  South  Dakota, 
Utah,  Vermont  and  West  Virginia. 

Three-fourths  of  the  states  require  the  budget-making  au- 
thority to  submit  a  budget  to  the  legislature  at  the  beginning 
of  the  session  or  during  the  first  month.  The  budget  docu- 
ments  of  a  majority  of  the  states  do  not  present  a  complete 
plan  of  proposed  expenditures  and  means  of  financing  them 
and  are,  therefore,  little  more  than  a  compilation  of  estimates. 
In  some  cases  the  budget  statement  includes  expenditure  and 
revenue  figures  for  the  past,  current  and  ensuing  fiscal  years, 
a  balance  sheet  of  state  finances,  and  a  debt  statement.  Most 
state  budget  laws  merely  authorize  the  budget-making  author- 
ity to  employ  such  classification  of  estimates  as  seems  essential. 
Estimates  of  expenditures  are  variously  classified  by  (1)  func- 
tions, (2)  organization  units,  (3)  objects,  (4)  character  and 
(5)  funds,  (2)  and  (3)  being  most  generally  used.  Virginia 
and  states  having  a  similar  budget  procedure  prescribe  classi- 
fication of  estimates  by  function,  character  and  objects. 

Approximately  a  dozen  of  the  states  provide  that  the  bud- 
get-making authority  shall  prepare  an  appropriation  bill  or  bills 
embodying  the  expenditures  proposed  in  the  budget,  and  sub- 
mit such  bill  or  bills  to  the  legislature  along  with  the  budget. 
Pew  states  recognize  the  advantages  of  a  single  appropriation 
act,  as  do  Massachusetts,  New  Jersey  and  Virginia.  The  pri- 
mary classification  of  appropriation  items  is  by   organization 

82 


units,  coupled  with  a  classification  designating  thei  services, 
commodities  and  obligations  lor  which  expenditures  are  to  oe 
made. 

Legislative  procedure  on  the  budget  is  prescribed  by  law 
in  only  one-half  of  the  states.  In  Alabama,  Max'yland,  West 
Virginia  and  Utah  the  legislature  is  without  power  to  increase 
proposals  of  the  budget-making  authority.  Pascsage  of  supple- 
mentary appropriation  acts  is  narrowly  restricted  in  Maryland, 
Massachusetts  and  Montana.  Limits  are  also  placed  upon  the 
enactment  of  special  appropriation  acts  in  Virginia  and  the 
states  following  its  budgetary  procedure.  Connecticut  and 
Maine  are  unique  in  having  joint  standing  committees  on  ap- 
propriations. In  New  Jersey,  New  YorK,  Virginia  and  Wis- 
consin the  appropriation  committees  do  act  jointly  in  practice. 
Budget  statutes  seldom  guarantee  consideration  of  appropria- 
tion bills  in  the  early  days  of  the  legislative  session. 

Recognizing  the  essential  dependence  of  an  effective  bud- 
get system  upon  an  integrated  state  government,  eight  states — 
California,  Idaho,  Illinois,  Massachusetts,  Nebraska,  New  Jer- 
sey, Ohio  and  Washington — ^have  effected  substantial  administra- 
tive consolidation  in  the  interest  of  economy  and  efficiency.  And 
eight  other  states — Connecticut,  Louisiana,  New  York,  Tennes- 
see, Texas,  Vermont,  West  Virginia  and  Wisconsin — have  cre- 
ated special  boards  or  committees  designed  to  introduce  busi* 
ness  methods  in  state  administration  and  institutions. 

Chapter  III 

OPERATION  OP  STATE  BUDGET  SYSTEMS 

Executive  Budgets  . 

In  1918  the  Massachusetts  Commission  to  Compile  Inform- 
ation and  Data  for  the  Use  of  the  Constitutional  Convention 
summarized  the  operating  results  of  budget  laws  in  twenty- 
four  states  as  follows  :^ 


(1)     Bulletins  for  the  Massachusetts  (Constitutional  Convention,  1917- 
1918,  vol.  I,  83. 

83 


(1)  "The  Legislature  is  provided  with  more  complete  infor- 
mation as  to  the  needs  and  resources  of  the  state;  (2)  'log-roll- 
ing' has  been  reduced;  (3)  greater  control  over  and  responsibil- 
ity for  expenditures  is  made  possible;  (4)  improved  accounting 
methods  have  accompanied  the  introduction  of  a  budget  system; 
and  (5)  the  finances  of  the  State  in  general  are  conducted  on  a 
more  business-like  basis." 

Contrasting  with  this  broad  endorsement  is  the  critical 
appraisal  of  state  budget  systems  by  a  competent  observer  writ- 
ing in  the  National  Municipal  Beview,  1921  :^ 

"A  large  majority  of  the  states  are  no  better  off  from  the 
standpoint  of  financial  planning  and  control  than  they  were 
before  they  provided  for  the  establishment  of  a  budget  system. 

"The  many  reasons  why  state  budget  systems  are  not  work- 
ing more  satisfactorily  may  be  summed  up  in  four  phrases:  (1) 
Inertia  of  state  officials;  (2)  shifting  of  responsibility  in  budget 
planning;  (3)  political  squabbles  and  deadlocks;  and  (4)  obso- 
lete machinery  and  antiquated  methods  of  state  government. 
From  first  to  last  these  stand  in  the  order  of  increasing  im- 
portance. 

"While  some  legal  provisions  are  necessary  for  the  establish- 
ment of  a  permanent  budget  system,  the  budget  law  is  not  every- 
thing. It  does  not  work  automatically;  it  is  merely  the  legal 
authorization  to  use  scientific  planning  in  financing  and  con- 
ducting the  work  of  the  state  government.  Willingness  and  en- 
terprise on  the  part  of  the  public  officials  and  properly  organ- 
ized governmental  machinery  are  necessary  to  carry  it  into 
operation.  Given;  these  conditions  a  state  may  have  a  satisfac- 
tory budget  system  without  a  budget  law." 

It  is  possible  to  check  these  estimates  of  budget  progress 
against  evidence  gathered  from  the  individual  states.  , 

Maryland 

Ex-Governor  Harrington  believes  the  Maryland  Budget 
amendment  is  working  very  well;^ 


(2)  Buck,  A.  E.,  "State  Budget  Progress,"  National  Municipal  Re- 
view, November,  1921,  p.  568. 

(3)  Letter  from  Hon.  Emerson  C.  Harrington,  Cambridge,  Novem- 
ber 10,  1921. 

84 


"The  only  criticism  that  I  have  of  the  budget  bill  is  that  there 
is  not  specifically  in  the  budget  bill  law  itself  provisions  giving 
the  Governor  sufiicient  help  in  the  preparation  of  the  budget, 
but  this  is  remedied  in  Maryland  by  the  fact  that  the  Governor 
has  a  contingent  fund  amply  sufficient  for  all  such  purposes. 
The  principal  criticism,  however,  I  make  of  the  budget  is  not  a 
defect  in  the  budget  law  itself,  but  in  the  practical  work  under 
it.  My  experience  was  that  the  Finance  Committees  of  the  two 
bodies  did  not,  nor  did  the  members  of  the  Legislature  them- 
selves, give  sufficient  attention  to  the  budget  bill  as  a  whole,  or 
to  the  details  thereof,  but  would  content  themselves  in  taking 
some  little  item  here  and  there  to  which  someone  might  make 
special  objection,  instead  of  taking  up  the  budget  bill  as  a  whole 
from  beginning  to  end  of  the  departments  and  reviewing  the 
action  of  the  Governor  and  the  needs  of  the  departments  as 
carefully  as  the  Governor  had  himself,  and  eliminating  whatever 
items  in  their  judgment  they  believed  needed  correction.  This, 
however,  is  not  a  question  of  a  defect  of  the  law  but  a  defect  of 
practical  administration." 

The  president  of  the  Maryland  senate  declares  -A 

"Maryland's  Budget  System  has  been  a  great  success.  The 
present  system  gives  adequate  financial  information  to  the  Leg- 
islature as  the  Executive  submits  a  statement  along  with  the 
budget. 

"Personally  I  am  opposed  to  the  restriction  of  the  Legislature's 
power  to  increase  items  in  the  appropriation  bill.  In  actual 
practice  the  way  it  works  out  the  Governor  is  the  appropriating 
power,  the  Legislature  simply  ratifies  his  budget,  of  course  the 
General  Assembly  has  the  power  to  reduce  but  it  rarely  ever 
does.  The  EJxecutive  sends  down  his  budget  and  after  much 
talk  and  looking  over  it  is  ratified  because  it  is  generally  felt 
that  any  tampering  with  the  budget  itself  will  endanger  the 
Governor's  program,  etc.,  etc. 

"The  present  system  practically  destroys  the  Legislative  power 
of  making  appropriations.  And  again  some  provision  should  be 
made  for  the  first  year  of  the  term  of  the  Governor.  He  is  in- 
augurated about  one  week  after  the  General  Assembly  has  con- 
vened and  thirty  days  after  is  required  to  send  in  his  budget  and 
estimate  of  receipts  etc.    To  a  new  man  this  is  a  gigantic  task. 

"I  am  in  favor  of  a  non-partisan  budget  officer  whose  duty  it 
shall  be  to  have  prepared  at  all  times  estimates  of  the  receipts 
and  disbursements  of  the  State,  whose  term  of  office  shall  not 


(4)     Letter  from  Hon.  William  L  Norris,  November  1,  1921. 

85 


expire  at  the  end  of  each,  administration  but  one  year  there- 
after, or  in  between  the  meeting  of  the  General  Assembly.  His 
duty  should  be  to  submit  to  the  Governor  and  the  General  As- 
sembly all  data  and  information  as  to  the  financial  affairs  of 
the  State.  The  Governor  should  then  make  up  his  budget  and 
the  General  Assembly  act  on  the  same  with  the  power  to  de- 
crease or  increase  as  it  may  deem  wise." 

ft 

A  former  speaker  of  the  Maryland  house  of  delegates  re- 
ports :^ 

"When  the  budget  is  being  prepared  by  the  Executive  he  is 
largely  guided  by  estimates  furnished  him  by  the  heads  of  de- 
partments or  institutions,  as  the  case  may  be.  After  the  Gov- 
ernor has  gone  into  this  matter  and  prepared  his  budget,  it  is 
then  submitted  to  the  Legislature,  who  have  the  authority  to  de- 
crease but  not  to  increase  the  items  in  the  appropriation  bill. 
If  the  Legislature  desires  to  (and  it  usually  does),  it  holds  hear- 
ings at  which  various  parts  of  the  budget  submitted  by  the  Gov- 
ernor are  examined  into,  information  being  furnished  as  desired 
by  the  heads  of  the  various  departments.  So  you  see  that  the 
Legislature  may  make  such  inquiries  as  they  desire  in  order  to 
fortify  themselves  upon  the  wisdom  of  passing  on  the  various 
items  contained  in  the  budget.  They  can  keep  the  Governor 
from  being  tooi  extravagant,  but,  they  are  themselves  barred  to 
extravagance,  in  that  they  can  not  increase  the  executive's  recom- 
mendation, each  being  a  check  upon  the  other. 

"As  to  the  effect  upon  the  total  annual  costs  of  said  govern- 
ment, there  is  absolutely  no  doubt  as  to  its  worth,  for  it  has 
saved  the  State  of  Maryland  thousands  and  thousands  of  dollars 
of  wasted  money.  The  costs  of  maintaining  our  House  of  Re- 
presentatives since  the  budget  law  has  been  in  effect  has  been 
from  twenty  to  forty  thousand  dollars  less  per  session  than  be- 
fore the  budget  law  came  into  effect.  This  is  true  largely  with 
other  departments.  Since  we  have  the  budget  law  in  Maryland, 
even  with  high  prices,  we  have  succeeded  in  reducing  state 
taxes  a  little. 

"As  to  the  effect  upon  the  actual  administration  of  the  State 
government,  it  is  good.  It  is  the  difference  between  a  man 
spending  money  without  reckoning  his  income  on  the  one  hand, 
and  on  the  other,  of  first  reckoning  his  income  and  making  the 
best  disposition  of  his  income  to  cover  his  needs. 

(5)     Letter  from  Hon.  M.  B.  Tydings,  Havre  de  Grace,  November 
5,  1921. 

86 


"I  am  sure  that  the  peop-le  of  Maryland  generally  regard  it 
as  wise  and  constructive  legislation,  and  that  they  will  not  will- 
ingly go  back  to  any  other  system  for  the  appropriation  of  pub- 
lic moneys." 

To  a  prominent  Baltimore  banker  the  financial  information 
made  available  by  the  Maryland  budget  to  the  legislature  seems 
full  and  adequate.^    He  continues: 

"The  restriction  of  the  legislative  power  to  increase  items  is 
vital.  You  will  probably  realize  that  the  form  adopted  by  our 
Budget  Commission  was  somewhat  new.  While  the  Legislature 
was  prevented  from  increasing  any  item  in  the  budget,  it  was 
permitted  after  the  budget  wus  passed,  to  introduce  bills  provid- 
ing for  items  not  in  the  budget  and  I  believe  for  increased  items, 
'provided  the  bill  carried  with  it  a  levy  for  the  purpose  on  the 
general  tax  rate.  This  had  the  effect  of  bringing  into  broad  day- 
light every  item  of  expenditure  not  provided  for  in  the  budget 
and  emphasized  the  fact  in  the  tax-payers'  minds,  not  only  that 
it  was  an  expenditure  not  approved  of  by  the  Governor,  but  the 
people  of  the  whole  State  were  being  taxed  for  the  purpose  of 
the  bill.  The  result  has  been,  I  believe,  that  practically  no  such 
bills  have  been  passed  by  the  Legislature. 

"It  is  impossible  to  measure  the  saving  in  cost  of  State  gov- 
ernment. The  direct  saving  has  been  very  large  but  the  indirect 
saving  has  been  even  greater.  For  years  before  the  Budget  Act 
became  law,  local  bills  were  introduced  for  work  throughout  the 
counties  of  the  State,  such  as  a  bridge  in  X  county,  an  armory 
in  Y  county,  etc.,  which  resulted  in  log-rolling  and  the  inclusion 
of  a  great  many  items  of  this  character  in  the  omnibus  bill. 

"Unless  such  items  now  appear  in  the  Governor's  budget,  the 
special  act  at  once  draws  attention  of  the  people  of  the  State 
to  the  fact  that  a  bridge  in  X  county  or  an  armory  in  Y  county 
is  going  to  be  paid  for  by  the  taxpayers  of  every  county  of  the 
State.  These  local  bills,  formerly  so  expensive  to  the  State,  are 
now  dead  letters." 

The   general   secretary   of   the   Baltimore   Merchants    and 
Manufacturers  Association  testifies:'^ 

"The  impresion  here  among  those  who  have  observed  the  oper- 
ation of  the  Budget  System  is  that  it  has  been  a  marked  success. 

(6)  Letter  from  B.  Howell  Griswold,  Jr.,  October  31,  1921. 

(7)  Letter  from  Secretary  A.  S.  Goldsborough,  November  10,  1921. 

87 


6f  course,  the  matter  has  not  been  on  the  statute  books  suffici- 
ently long  yet  for  it  to  demonstrate  the  measure  of  its  value. 
The  experience,  so  far,  seems  to  be  satisfying  to  those  who  have 
watched  the  workings  of  the  law  in  the  matter  of  providing  for 
the  Legislature  an  adequacy  of  financial  information.  No  criti- 
cisms have  been  made  of  the  law  at  this  point. 

"There  is  a  very  definite  feeling  among  all  elements  in  our 
State  that  the  budget  system  would  lose  75%  of  its  real  service 
to  the  taxpayer* if  it  failed  to  carry  the  restriction  which  pre- 
vents the  Legislature  from  increasing  appropriations.  That 
limitation,  as  a  matter  of  fact,  is  one  of  the  most  efficacious 
points  in  the  whole  law.  I  am  rather  inclined  to  believe  that 
the  public  would  fight  most  strenuously  against  any  change  at 
this  point.  Our  experience  has  been  that  this  restriction  has 
.been  of  value  in  the  actual  administration  of  departments,  be- 
cause it  has  checked  up  any  possibility  of  departments  submitting 
one  basis  of  estimates,  and  then,  on  the  quiet,  trying  to  find  help 
in  the  Legislature  to  have  the  appropriation  for  such  department 
increased. 

"We  believe  from  our  observation  that  the  Budget  System  has 
been  one  of  the  most  stimulating  influences  in  causing  the  present 
governor  to  pay  so  much  attention  to  the  administrative  machin- 
ery of  the  State.  I  believe  that  the  workings  of  the  Budget  and 
the  disclosures  it  made  in  the  matter  of  administrative  cost  are 
the  real  explanation  of  the  Governor's  recent  campaign  to  bring 
about  the  complete  reorganization  of  our  State  Administrative 
System.  As  a  matter  of  fact,  his  program  of  reorganization  was 
made  an  issue  in  the  election  campaign  just  closed,  and  resulted 
in  an  overwhelming  triumph  of  his  policies. 

"We  find  it  somewhat  difficult  to  make  a  comparison  in  dol- 
lars and  cents  savings  under  the  Budget  System,  because  our 
system  has  come  into  vogue  since  the  period  of  the  high  cost  of 
everything,  and,  as  a  consequence,  we  have  no  like  conditions 
without  the  budget  to  compare  with  the  effect  that  the  budget 
itself  produced.  There  is  a  moral  conviction,  however,  that  but 
for  the  budget  our  general  expenditures  would  have  been  heavier. 
The  only  lines  of  criticism  that  we  hear  directed  against  the 
budget  is  the  fact  that  the  construction  and  submission  of  a 
Budget  Bill  apparently  so  completely  covers  the  fiancial  situa- 
tion of  the  State  that  the  legislature  is  pre-disposed  to  treat 
it  in  a  perfunctory  rather  than  in  an  investigatory  way.  This, 
however,  is  an  indirect  compliment  to  the  Budget  System,  rather 
than  a  criticism,  because  it  evidences  the  fact  that  the  Legisla- 
ture considers  the  Budget  so  sound  as  well  as  comprehensive, 
that  it  would  be  senseless  to  engage  in  petty  attacks.  Everybody 
feels,  however,  that  if  there  was  any  real  weakness  in  the  budget 

88 


appropriations  that  it  would  be  very  certain  to  evoke  a  violent 
outbreak  on  the  part  of  discontented  members  of  the  Legislature." 

Certain  defects  in  Maryland's  finance  organization  have 
been  revealed  by  an  efficiency  survey  of  the  state  administra- 
tion :^ 

"(1)  There  is  no  official  of  the  state  now  recognized  as  being 
responsible  to  the  Governor  for  the  advice  and  assistance  needed 
on  all  problems  of  finance  and  financial  control.  It  is  believed 
that  adequate  study  of  all  problems  of  finance  and  the  develop- 
ment of  a  system  of  financial  administration  meeting  the  re- 
quirements of  centralized  administration  is  almost  impossible 
so  long  as  the  Governor  is  not  assisted  by  a  full  time  general 
financial  official. 

"(2)  There  is  no  office  responsible  for  control  and  enforce- 
ment of  the  budget  and  estimating  system  and  for  securing  the 
information  needed  to  compile  the  budget  and  review  the  esti- 
mates of  departments. 

"(3)  The  independent  accounting  and  auditing  office  under 
the  Comptroller  is  not  given  the  complete  powers  and  authority 
to  direct  all  work  of  review  and  audit  needed  to  permit  the  de- 
velopment of  its  full  influence  and  usefulness." 

Utah 

No  comment  is  available  upon  the  Utah  budget  law  "Orig- 
inally modelled  after  that  of  Maryland  but  recently  amended 
to  provide  a  department  of  finance  and  budget  as  in  Illinois. 

Nevada 

Resembling  Maryland's  practice  except  in  freedom  of  the 
legislature  to  increase  budget  items,  the  Nevada  budget  law 
has  found  favor  in  certain  quarters.  Governor  E.  D.  Boyle 
declares;^ 

"The  result  of  the  Budget  in  Nevada  was  the  reduction  of  the 
state  expenditures  for  the  1921-1922  biennium  some  18  per  cent 
below  the  expenditures  for  the  preceding  biennium. 


(8)  Report  in  re  The  Organization  and  Administration  of  the 
State  Government  of  Maryland,  Pt.  Ill,  Griffenhagen  and  Associates, 
April,  1921,  p.  59. 

(9)  Letter  from  Governor  E.  D.  Boyle,  June  13,  1921. 

89 


"The  only  departure  from  executive  budget  practice  here  was 
provided  in  a  plan  whereby  the  Ways  and  Means  Committees 
of  the  two  Houses  were  present  at  the  general  budget  hearings. 

These  committees  were  asked  to  participate  in  the  discussion,  to 
counsel  with  the  Governor  and  to  treat  the  whole  proposition  of 
preparing  the  document  as  a  cooperative  enterprise. 

"I  did  this  in  the  belief  that  better  results  would  be  obtained- 
thereby,  and  also  because  of  the  fact  that  the  right  of  the  legis- 
lature to  initiate  appropriations  could  not  be  questioned  under 
the  Nevada  constitution." 

Counsel  for  the  Southern  Pacific  Railroad  thus  character- 
izes the  Nevada  Budget  System  :^^ 

"It  gives  to  legislative  appropriations  an  intelligent  direction 
and  its  immediate  tendency  is  toward  economy.  It  has  operated 
here  to  put  an  end  to  the  old  system  of  log-rolling  in  appropria- 
tions. In  addition  to  this  it  has  uniformly  required  care  in  the 
expenditure  of  appropriations  to  each  of  the  various  departments 
of  the  government.  It  has  operated  to  the  advantage  of  the 
people  in  general  through  a  reduction  in  taxation  for  state  and 
county  purposes — .  I  do  not  believe  anyone  in  Nevada  would 
think  of  returning  to  the  old  system." 

Virginia 

In  Virginia  the  governor  designated  an  advisory  board  of 
two  senators  and  three  representatives  of  the  legislature  to  as- 
sist him  in  the  preparation  of  the  first  budget.  His  purpose 
was  (1)  to  establish  a  closer  cooperation  with  the  general  as- 
sembly in  the  administration  of  the  budget  law;  (2)  to  avail 
himself  of  the  experience  of  men  of  long  training  in  the  legis- 
lature in  the  handling  of  appropriations,  and  (3)  to  provide  an 
opportunity  for  representatives  of  each  house  of  the  general 
assembly  to  familiarize  themselves  thoroughly  with  the  budget 
estimates.  Prior  to  preparation  of  the  estimates  the  governor 
also  employed  a  trained  economist,  a  statistician  and  experts  from 
the  Institute  for  Public  Service  of  New  York  and  the  Detroit 
Bureau  of  Government  Research  to  make  administrative  sur- 
veys of  every  major  state  department  and  institution  involving 
117  separate  reports  and  22  special  studies.    A  scientific  basis 

(10)     Letter  from  Samuel  W.  Telford,  Reno,  September  15,  1921. 

90 


was  thus  laid  for  administrative  reorganization  and  introduc- 
tion of  business  methods  in  state  government.  ^^ 

Despite  the  handicap  of  a  decentralized  state  administra- 
tion, the  Virginia  budget  system  has  achieved  substantial  suc- 
cess. A  statement  by  the  chairman  of  the  committee  on  appro- 
priations of  the  Virginia  house  of  delegates,  1920,  reads  r^^ 

"With  the  approval  of  Governor  Davis  of  House  Bill  No.  318 
on  March  10,  1920,  making  appropriations  for  the  next  two  years 
amounting  to  a  total  of  $22,496,000,  Virginia's  first  budget  be- 
came a  reality.  While  the  appropriation  bill  as  passed  by  the 
General  Assembly  exceeds  the  Governor's  original  budget  recom- 
mendations by  $352,000,  it  nevertheless  is  within  the  estimated 
revenues  of  the  State  for  the  next  two  years — according  to  the 
Auditor  of  Public  Accounts — by  $343,000.  Never  before  in  the 
history  of  the  State  has  an  appropriation  bill  been  framed,  con- 
sidered and  passed  with  the  same  degree  of  intelligent  interest, 
and  with  as  much  detailed  information  at  the  command  of  the 
individual  members  of  the  General  Assembly,  as  was  this  first 
bill  under  our  budget  system. 

"Providing  a  clear  increase  of  $1,000,000  for  the  public  schools 
of  the  State  payable  direct  out  of  the  State  treasury,  instead  of 
having  to  increase  taxes  to  provide  for  our  school  needs — which 
means  a  saving  to  the  taxpayers  ot  the  Commonwealth  for  the 
next  two  years  of  the  equivalent  of  a  six  cent  increase  in  the 
general  property  tax;  and  carrying  liberal  increases  in  appro- 
priations for  pensions,  roads,  agriculture,  all  the  educational 
institutions,  for  the  State  hospitals,  and  for  almost  every  de- 
partment of  the  State  government,  including  increased  salaries 
for  nearly  every  State  officer  and  employe,  the  budget  makes 
ample  provision  for  the  efficient  conduct  of  the  State  government 
for  the  next  two  years  at  a  saving  of  more  than  $3,000,000  as 
compared  with  the  estimates  of  the  departments  and  institu- 
tions filed  with  the  Governor  in  November. 

"As  chairman  of  the  appropriation  committee  of  the  House  of 
Delegates,  I  am  in  full  sympathy  with  the  budget  system,  and 
am  convinced  that  it  will  do  more  to  place  the  State's  affairs  on 
a  business  basis  than  any  other  single  piece  of  legislation  that  has 
ever  been  enacted  in  Virginia.  I  am  thoroughly  convinced,  now 
that  we  have  fully  worked  out  the  procedure  under  the  budget 

(11)  Commonwealth  of  Virginia,  Budget,  1920-1922,  XIII. 

(12)  Statement  of  Honorable  J.  Sinclair  Brown,  Roanoke  County, 
1920. 

91 


system,  that  the  appropriation  act  can  be  disposed  of  from  two 
to  three  weeks  earlier  at  the  next  session  than  was  the  case  at 
this  session." 

The  secretary   of  the  Roanoke  Association  of   Commerce 

remarks,  ''that  for  the  first  time  in  the  history  of  the  State, 

stock  has  been  taken  and  we  know  exactly  what  it  is  costing  to 

run  each  department.    If  the  budget  served  no  other  purpose  than 

that  of  an  educational  nature,  we  believe  it  would  still  be  worth- 
while.''13 

South  Carolina 

In  a  special  report  upon  South  Carolina's  budget  system, 
dated  October  15,  1920,  Griffenhagen  and  Associates,  Ltd.,  ef- 
ficiency engineers  and  accountants  of  Chicago,  found  :^* 

"South  Carolina  is  far  in  advance  of  most  states  in  its  ac- 
ceptance of  the  budget  idea  and  the  state  of  development  to 
which  it  has  been  brought  by  its  budget  procedure." 

Governor  Cooper  in  presenting  the  1921  budget  to  the 
South  Carolina  legislature  declared  r^^ 

"While  the  budget  system  has  been  in  operation  only  one 
year,  the  fiscal  year  1920  has  been  closed  with  the  result  of  an 
unusually  satisfactory  condition  to  the  treasury.  The  1921  bud- 
get does  not  contain  a  single  request  for  a  deficiency  appropria- 
tion, whereas  last  year  the  Legislature  was  called  upon  to  op- 
propriate  for  deficiencies  in  a  sum  exceeding  one-fourth  of  a 
million  dollars." 

The  South  Carolina  budget  law  provides  that  the  chairman 
of  the  house  ways  and  means  committee  and  of  the  senate  fin- 
ance committee  shall  sit  with  the  governor  at  the  public  hear- 
ings on  the  estimates;  but  the  governor  bears  complete  respon- 
sibility for  the  budget  submitted  to  the  legislature.  Effective 
cooperation  between  the  legislative  leaders  and  the  governor, 
together  with  the  constant  employment  of  experts  to  reconstruct 

(13)  Letter  from  Secretary  John  Wood,  June  13,  1921. 

(14)  The  South  Carolina  State  Budget,  1921,  p.  4. 

(15)  Ibid. 

92 


the  state's  accounting  methods,  are  making  for  steady  improve- 
ment in  South  Carolina's  budgetary  system  patterned  after 
that  of  Virginia. 

*  Oklahoma 

'  The  Oklahoma  budget  law,  copied  from  Virginia,  has  not 
worked  well.  Partisan  wrangles  in  1921  between  a  Democratic 
governor  and  the  legislature  with  a  Democratic  senate  and  a 
Republican  house  created  a  deadlock  on  appropriations,  temp- 
orarily broken  to  pass  a  few  deficiency  bills. ^^ 

A  survey  of  Oklahoma's  financial  system,  issued  by  the 
State  University's  Bureau  of  Municipal  Research,  summarizes 
existing  defects  in  Oklahoma's  budget  procedure  i^^ 

"To  he  truly  effective  the  law  should  forbid  the  Legislature 
from  considering,  except  by  extraordinary  vote,  any  appropria- 
tion that  has  not  been  submitted  through  the  governor.  This, 
however,  would  necessitate  a  constitutional  amendment,  since, 
as  noted  above,  the  Legislature,  when  not  specifically  restricted 
by  the  constitution,  has  power  over  all  rightful  subjects  of  leg- 
islation, and  may  also  override  the  Governor's  veto  by  a  two- 
thirds  vote. 

"Another  stumbling  block  in  the  road  to  a  true  executive  bud- 
get is  the  independence  of  the  state  administrative  departments. 
Since  they  are  not  responsible  to  the  Governor,  but  for  the 
most  part  derive  their  authority  from  the  same  source  as  he — 
the  Constitution  and  the  people — they  are  to  a  large  extent  in- 
dependent of  him  in  financial  planning,  and  even  were  he  given 
the  final  work  in  making  financial  plans,  the  carrying  out  of 
these  plans  would  still  be  in  the  hands  of  independent  officials. 

"Another  defect  of  the  present  system  is  that  under  it  the 
out-going  Governor  prepares  the  financial  plans  for  the  first  two 
and  one-half  years  of  his  successor's  term. 

"Still  another  stumbling  block  in  the  road  to  a  really  respon- 
sible executive  budget  is  the  existing  lack  of  provision  for  a 
'showdown'  in  case  of  a  deadlock  between  the  Governor  and  the 
Legislature  over  the  financial  plans,  as  presented  in  the  budget. 

(16)  Buck,  "State  Budget  Progress,"  p.  573. 

(17)  Blachly,  F.  M,  The  Financial  System  of  the  State  of  Okla- 
homa, University  of  Oklahoma  Bulletin,  Studies  in  Government  and 
Administration,  No.  3,  January,  1921,  pp.  23-24. 

93 


"The  Oklahoma  System  should  be  so  amended  as  to  provide 
for  the  submission  by  the  Governor,  in  connection  with  his  plans 
for  expenditures,  of  copies  of  tentative  bills  for  any  changes  in 
the  revenue  laws  that  he  may  deem  essential  to  that  plan,  and 
for  the  consideration  of  these  bills  by  the  budget  committee. 

"The  preparation  of  the  state  budget  this  year  has  been  serious- 
ly hampered  by  the  failure  of  the  last  Legislature  to  provide 
the  funds  necessary  for  the  employment  of  an  adequate  staff  to 
assist  the  Governor  in  making  the  survey  of  state  departments 
and  institutions  which  is  provided  for  by  section  6  of  the  budget 
act.  This  defect  is  not  inherent  in  the  provisions  of  the  act 
itself,  but  is  entirely  due  to  lack  of  proper  financial  support." 

Illinois 

In  1921  Governor  Small  of  Illinois  surrendered  the  initia- 
tive in  state  financial  planning  to  the  legislature.  One  month 
after  taking  office  he  submitted  to  the  legislature  the  budget 
prepared  by  his  predecessor,  Grovemor  Lowden,  but  refused  to 
accept  any  responsibility  for  the  recommendations  contained 
therein.  1^  The  result  was  that  legislative  appropriations 
in  1921  of  $81,488,267  exceeded  the  budget  estimates  by  four- 
teen million  dollars,  in  contrast  with  appropriations  in  1919 
of  $62,096,009,  exceeding  the  estimates  by  less  than  nine  million 
dollars.  And  the  governor  at  the  last  minute  negatively  influ- 
enced the  state's  financial  and  work  program  by  vetoing  appro- 
priations totaling  $6,900,492,  as  against  $340,022  vetoed  in  1919. 

According  to  the  general  secretary  of  the  Illinois  Chamber 
of  Commerce,^^  *'The  business  men  of  Illinois  look  upon 
Governor  Lowden 's  administration  as  one  of  the  most  success- 
ful the  state  has  ever  enjoyed,  due  fundamentally  to  his  organ- 
izing the  state  on  a  more  business-like  basis  than  it  had  ever 
been  run  before. 

**His  installation  of  the  budget  system  is  one  that  has  met 
with  the  heartiest  approval  of  everyone We,  here  in  Illin- 
ois, believe  that  the  budget  system  is  just  as  essential  in  run- 
ning a  state  as  it  is  in  running  a  business." 

* 

(18)  Buck,  "State  Budget  Progress,"  572. 

(19)  Letter  from  Secretary  Harvey  T.  Hill,  CHiicago,  June  8,  1921. 

94 


Professor  John  A.  Fairlie,  formerly  director  of  the  Illinois 
Economy  and  Efficiency  Commission,  states  i^o 

"The  Illinois  budget  system  has  worked  well  within  the  limits 
of  the  administrative  reorganization.  This  was  most  clearly  dem- 
onstrated  in  1919.  The  state  expenditures  for  the  two  preceding 
years  for  the  administrative  code  departments  had  been  kept 
substantially  within  the  appropriations,  except  for  food  and  other 
supplies  for  the  charitable  and  correctional  institutions,  where 
the  general  increase  of  prices  could  not  be  avoided.  Expenditure 
for  the  elective  offices  not  under  the  administrative  code  showed 
— even  more  than  the  usual  excess  over  appropriations  for  the 
same  two  years. 

"Appropriations  made  in  1919  for  the  administrative  code  de- 
partments were  in  accordance  with  the  Governor's  budget;  but 
appropriations  for  elective  offices  not  covered  by  the  code  had, 
as  usual,  a  considerable  increase  over  the  original  budget  esti- 
mates. 

"In  the  present  year,  the  making  of  the  budget  was  affected  by 
the  change  of  administration;  and  illustrates  the  difficulty  in- 
volved in  having  a  retiring  official  prepare  a  budget  for  his  suc- 
cessor. The  budget  was  prepared  under  Governor  Lowden;  and 
was  submitted  by  the  new  Governor  (Small)  without  recommen- 
dation, as  he  had  not  had  time  to  go  over  it  in  detail  in  the 
month  between  his  inaugration  and  the  date  set  for  presenting 
the  budget. 

"The  legislative  appropriations  made  this  year  were  largely  in 
excess  of  the  budget  estimates,  a  considerable  part  of  this  again 
being  for  offices  and  institutions  not  covered  by  the  administra- 
tive code.  Probably  a  good  part  of  this  increase  would  have 
been  made  in  any  case,  on  account  of  the  higher  scale  of  prices. 
The  Governor  exercised  his  power  of  vetoing  items  more  freely 
than  before  and  thus  reduced  the  appropriations  materially." 

Nebraska 

Nebraska's  budget  practice  generally  follows  that  of  Illinois 
but  differs  from  it  in  certain  respects.  By  a  constitutional 
amendment  of  1920  the  governor  of  Nebraska  shall  present  at 
the  beginning  of  each  legislative  session  a  complete  itemized 
budget  covering  all  state  activities  for  the  ensuing  biennium. 
No  appropriations  shall  be  made  in  excess  of  the  recommenda- 

(20)     Letter  from  Prof.  John  A.  Fairlie,  Urbana,  August  10,  1921. 

95 


tions  contained  is  such  budget  unless  by  a  three-fifths  vote  of 
each  house  of  the  legislature,  and  such  excess  so  approved  by 
a  three-fifths  vote  shall  not  be  subject  to  executive  veto. 21 
Other  deviations  from  Illinois'  practice  are:^^ 

(1)  The  out-going  governor  shall  deliver  the  budget  to  the 
legislature  previous  to  the  close  of  his  term,  and  the  incoming 
governor  shall  have  fifteen  days  in  which  to  review  such  budget 
and  may  send  to  the  legislature  a  supplementary  budget  message 
suggesting  any  changes  which  he  deems  wise;  and 

(2)  The  governor  shall  submit  to  the  legislature  with  his 
budget,  copies  of  a  tentative  bill  for  all  proposed  appropriations 
of  the  budget  clearly  itemized  and  properly  classified. 

Governor  McKelvie  reports  that  under  the  Nebraska  admin- 
istrative code  of  1919  ''each  spending  agency  was  required  to 
submit  periodical  estimates  of  expenditures  to  the  Department 
of  Finance  before  expenditures  were  made.  Thus,  such  a  check 
was  obtained  over  expenditures  that  we  were  able  to  run  these 
departments  without  any  deficiency  whatever  during  the  bien- 
nium,  and  a  surplus  of  $188,000  remained  unexpended.  This 
is  the  first  time  in  many  years  that  all  of  these  departments 
have  been  run  without  a  deficiency. ''^ 3 

MdssachiiseUs 

Owing  to  effective  cooperation  between  the  legislature  and 
executive  the  Massachusetts  budget  system  is  being  steadily 
improved  and  regarded  with  increasing  favor. 

By  mutual  agreement  in  1920,  for  the  first  time,  the  senate 
and  house  ways  and  means  committees  meeting  jointly  heard 
and  revised  the  governor's  budget.  The  joint  committee  found 
itself  in  a  difficult  position  for  the  governor's  revenue  program 
not  only  contained  some  rather  questionable  recommendations 
but  fell  short  of  his  expenditure  program  by  $1,300,000.  In 
order  to  guard  against  executive  evasion  of  responsibility  for 
the  budget,  the  committee  requested  that  he  "submit  to  the 

(21)  Constitution  of  Nebraska  as  amended   1919-1920,  Article  IV, 
sec.  7. 

(22)  Nebraska  Session  Laws,  H.  R.  No.  492,  1921. 

(23)  Letter  from  Governor  S.  R.  McKelvie,  August  5,  1921. 

96 


General  Assembly  a  supplementary  budget  containing  a  state- 
ment of  'all  taxes,  revenue,  loans  and  other  means  by  which  the 
expenditures  recommended  in  his  original  budget  message  shall 
be  defrayed.'  "  The  governor  acceded  to  this  request.  Instead 
of  recommending  the  misappropriation  of  capital  funds  he  urged 
the  legislature  to  increase  the  direct  state  tax  from  $12,000,000 
to  $14,000,000,  dropped  the  indefinite  special  taxes,  and  sub- 
stituted additional  levies  on  inheritance  and  corporate  in- 
comes.^^ 

In  practice  the  governor  is  now  looked  to  for  leadership  in 
matters  of  appropriation,  and  harmonious  relations  with  the 
legislature  have  prevailed  to  such  an  extent  that  most  of  the 
troublesome  financial  questions  are  settled  before  reaching  the 
appropriation  stage.  Hence  the  governor  has  not  exercised 
his  constitutional  right  of  vetoing  items  of  appropriation.^^ 

Honorable  Benjamin  Loring  Young,  speaker  of  the  house 

in  1921,  authorizes  the  following  statement  of  striking  results 

already  obtained  under  the  Massachusetts  budget  system: 

"It  has  imposed  upon  the  Governor  financial  responsibility  and 
leadership.    Before  its  adoption,  the  Governor  had  no  control  of 
appropriations   except  through  the  exercise  of  the  veto  power. 
He  had  no  real  authority  to  make  a  definite  financial  plan,  for 
the  fiscal  year  and  submit  it  to  the  Legislature.     All  the  vari- 
ous state  departments  submitted  separate  estimates  to  the  Leg- 
islature, and  there  was  no  executive  revision  or  study  of  these 
estimates.    The  entire  burden  of  comparison,  study  and  revision 
was    thrown    upon    a   legislative   committee   which    had    neither 
time,  facilities  nor  expert  knowledge  for  the  task.    Estimates  were 
considered  throughout  the  entire  session  and  in  1915,  136  sep- 
arate appropriation  bills  were  passed  by  the  Legislature.     It  la. 
obvious  that  under  such  a  system  absolute  fairness  was  almost: 
impossible  to  achieve.     Furthermore,  there  was  no  real  attempt 
by  anybody  to   balance  expenditures   and  revenues   in  advance 
Appropriations    were    made    as    seemed    necessary.      They    were« 
added  up  at  the  end  of  the  session.     The  total  figure  was  com- 
pared with  the  estimated  revenue  of  the  state  under  existing  law^. 

and  the  amount  of  the  deficit  levied  on  the  cities  and   towns 
as  a  so-called  state  tax.     This  state  tax  is  the  historic  method  of 

(24)  Gulick,  L.  H.,  State  Service,  July— August,  1920,  p.  571. 

(25)  Letter  from  Supervisor  of  State  Administration,  December  15, 
1921. 

97 


finance  for  Massachusetts.  Under  the  budget  system,  the  whole 
plan  is  made  in  advance,  all  estimates  must  go  through  the  office 
of  the  Supervisor  of  Administration  which  has  an  expert  staff 
agency  created  to  advise  the  Governor  on  budget  matters. 

"The  budget  itself  is  filed  in  January  by  the  Governor.  It 
shows  the  requests  of  all  the  various  departments  and  also  the 
personal  responsible  recommendation  of  the  Governor  on  every 
item  together  with  the  Governor's  plan  for  the  fi,nancing  of  all 
expenditures  for  the  current  year.  This  estimate  does  not  in- 
sure perfection  but  it  has  at  least  brought  order  out  of  financial 
chaos. 

"The  budget  system  makes  unpopular  the  old  pastime  of  'pass- 
ing the  buck'.  Frequently,  one  reads  in  a  Governor's  message 
a  beautiful  plan  for  old  age  pensions  and  many  other  social  im- 
provements without  a  word  as  to  their  cost.  The  same  message 
usually  closes  with  an  appeal  to  the  legislature  for  strict  econ- 
omy and  a  reduction  of  state  expenses.  When  every  expenditure 
recommended  by  the  Governor  must  be  included  in  his  budget, 
he  is  not  likely  to  recommend  any  expenditure  which  can  not 
be  properly  and  wisely  financed. 

"A  reduction  in  the  number  of  appropriation  bills  from  136  in 
1915  to  2  in  1921  has  meant  a  saving  of  time  and  money.  The 
general  appropriation  bill  of  today  gives  one  an  accurate  picture 
of  the  entire  administration  of  the  state. 

"The  budget  system  will  curtail  although  it  may  not  entirely 
remove  the  greatest  evil  of  American  legislation;  namely  the 
*pork  barrel'.  Many  persons  regard  that  Legislator  as  most 
efficient  who  can  get  the  largest  sum  out  of  the  state  treasury 
for  local  improvements — highways,  harbors,  buildings,  every- 
thing that  will  ornament  and  enrich  a  particular  locality.  The 
Governor  views  expenditures  from  the  point  of  view  of  the 
whole  state,  not  the  narrow  aspect  of  one  district.  He  is  not 
likely  to  include  such  expenses  in  his  budget. 

"Our  budget  law  provides  that  special  appropriation  bills  may 
be  enacted  by  the  Legislature  after  final  action  on  the  budget, 
but  that  'such  bills  shall  provide  the  specific  means  for  defray- 
ing the  appropriations  therein  contained.'  The  man  who  wants 
$100,000  for  a  public  building  at  Bingeville  Corners  must  tell 
the  people  exactly  where  the  money  is  coming  from  because  the 
Governor  did  not  put  it  in  the  budget.  This  is  calculated  to  take 
a  large  measure  of  the  joy  out  of  life. 

"The  budget  itself  can  not  be  said  to  reduce  indebtedness, 
but  it  tends  in  that  direction.  It  brings  the  glare  of  publicity 
upon  state  finance.  In  Massachusetts  the  net  direct  debt  of 
the  state  which  excludes  the  indebtedness  for  Metropolitan  im- 

t8 


provements  in  and  near  Boston  was  in  1917,  $33,658,000.  Mas- 
sacliunetls  paid  her  soldiers  a  $100  bonus  at  a  total  expense 
of  nearly  $20,000,000.  A  considerable  amount  of  this  still  shows 
in  the  debt  column  and  yet  today  the  net  direct  debt  of  the 
state  is  only  $35,000,000.  The  budget  has  forced  the  adoption 
of  a   pay-as-you-go   policy. 

"Lfet  me  suggest  two  essentials  for  the  making  of  a  budget 
system  which  will  be  really  a  success.  The  first  relates  to 
legislative  procedure;  the  second,  to  financial  control  after  ap- 
propriations are  made. 

"I  regard  it  as  essential  that  all  financial  legislation  be  re- 
ferred to  one  committee  which  should  be  a  joint  committee  for 
representing  both  branches  of  the  state  legislature.  Absolute 
financial  responsibility  must  be  pinned  on  someone.  In  the 
executive  branch,  place  it  on  the  Governor  because  he  is  the 
chief  civil  officer  of  the  state  whose  responsibility  and  leader 
ship  should  be  increased  until  he  becomes  a  real  business  man- 
ager of  the  state.  In  the  Legislature,  place  the  responsibility 
for  study  and  authorizing  the  Governor's  financial  program 
on  a  committee  of  picked  men.  Once  get  a  good  budget  system, 
and  unwise  appropriation  of  money  becomes  very  difficult.  Sup- 
plement your  budget  system  with  sound  accounting.  It  is  much 
harder  to  get  the  Legislature  to  appropriate  money  unwisely 
than  it  is  to  get  a  public  official  or  department  to  spend  that 
money  unwisely  or  to  allow  the  material  and  other  supplies 
which  may  be  bought  with  that  money  to  be  extravagantly  or 
dishonestly  used." 

Business  men  of  Massachusetts  freely  endorse  the  state's 
executive  budget  system.  The  secretary  of  the  Massachusetts 
State  Chamber  of  Commerce  writes  i^? 

"Certainly  it  has  seemed  to  every  one  that  this  year  the 
budget  which  has  been  established  for  three  years  has  com- 
menced to  demonstrate  its  worth  in  a  practical  fashion.  The 
results  show  that  it  provides  an  early  and  correct  knowledge 
of  what  the  state  taxes  must  be  for  the  forthcomng  year. 

"This  is  quite  a  contrast  to  the  old  method  of  departmental 
appropriations  under  which  information  as  to  the  amount  of  the 
state  tax  could  only  be  ascertained  by  the  Legislature  toward 
the  end  of  the  Legislative  session  and  so  far  as  the  public  was 
concerned  was  not  likely  to  be  wholly  understood  until  the  ad- 
journment of  the  Legislature. 


(26)     Letter  from  Secretary  E.  G.  Stacy,  Boston,  June  6,  1921. 

99 


"A  second  very  great  advantage  is  that  the  Goyernor  is  en- 
abled to  have  before  him  many  weeks  prior  to  the  opening  of 
the  General  Ck)urt  a  related  scheme  of  state  financing  for  his 
study  and  approval  which  has  been  based  upon  very  careful  ex- 
amination and  appropriation  by  each  state  department  in  Oc- 
tober covering  its  needs  for  the  ensuing  calendar  year.  This 
makes  of  the  Governor  a  real  chief  executive  in  charge  of  all 
of  the  finances  of  the  State.  Furthermore,  it  provides  the 
Legislature  at  the  out-set  of  its  session  with  a  comprehensive 
analysis  of  the  state's  business  affairs. 

"The  result  has  been  e^ideuced  in  the  fact  that  the  Legis- 
lature has  steadily  become  more  conservative  and  during  the 
session  which  has  just  endeil  affected  remarkable  economies 
and  turned  down  practically  all  legislation  involving  new  ap- 
propriations where  the  work  could  not  be  expected  to  be 
largely  self-supporting  from  the  fees. 

"It  was  anticipated  that  the  state  tax  might  have  to  be  in- 
creased two  million  dollars  but  because  of  the  Governor's  econ- 
omy program  and  the  intelligent  interest  which  the  public  was 
able  to  take  in  the  state's  financial  affairs  the  Legislature  was 
able  to  reduce  its  appropriations  and  keep  within  the  old  state 
tax  which  is  $14,000,000. 

"Another  very  marked  influence  of  the  state  budget  is  the 
result  it  is  having  upon  the  practice  formerly  indulged  in  of 
voting  special  appropriations  for  local  road  work  which  al- 
ways savored  of  'pork  barrel'  methods.  During  the  recent  ses- 
sion local  road  bills  were  all  defeated  and  appropriations  kept 
down  accordingly." 

New  Jersey 

The  secretary  of  the  New  Jersey  State  Chamber  of  Com- 
merce finds  that  the  state^^s  executive  budget  has  seven  advan- 
tages over  the  previous  legislative  budget  :^'^       . 

"(1)'  More  careful  consideration  of  the  requests  by  the 
various  departments  for  their  requirements  for  the  coming 
year. 

"(2)  An  opportunity  to  compare  the  requirements  of  the 
various  departments  to  get  their  relation  to  the  whole  question 
of  appropriation. 

"(3)  The  necessity  of  the  departments  developing  their  en- 
tire program  which  has  materially  reduced  the  supplemental 
requests. 


(27)     Letter  from  Secretary  E.  M.  Barradale,  Newark,  June  9,  1921. 

100 


;   '  >  '  >  ' 


:>,' 


,  ,  ,     ,   )  J  J 

"(4)  The  time  allotted  for  consideration  of  the  budget  by 
the  Executive  Department  gives  a  better  opportunity  to  in- 
vestigate the  real  needs  of  the  Departments. 

"(5)  The  executive  budget  enables  the  Governor  to  have  more 
control  over  the  administrative  departments. 

"(6)  The  Legislature  gets  through  its  Appropriations  Com- 
mittee, a  more  comprehensive  and  understandable  survey  of  the 
requirements. 

"(7)  The  amendment  advancing  the  fiscal  year  from  No- 
vember 1st  to  July  1st  increases  the  time  within  the  Gover- 
nor's term  over  which  his  budgetary  activities  run." 

Senator  Arthur  Whitney,  who  has  been  a  member  of  the 
committee  on  appropriations  since  the  installation  of  the  exec- 
utive budget  and  acted  as  chairman  of  the  committee  for  three 
years,  makes  the  following  comments  upon  New  Jersey's  exec- 
utive budget  system  :28 

''The  New  Jersey  budget  act  went  into  effect  in  1916  and  has 
in  five  years  proved  its  value  in  the  efficient  distribution  of  the 
state's  funds. 

"The  Governor  may  engage  such  assistance  as  he  desires  in 
the  preparation  of  the  budget,  but  a  serious  defect  in  the  New 
Jersey  statute  is  that  there  is  no  permanent  budget  bureau  and 
no  budget  officer  required  by  law.  It  would  be  possible  for  a 
Governor  to  have  no  records  and  to  dismiss  all  persons  who  had 
been  connected  with  the  preparation  of  the  budget,  so  that 
a  Legislature  forced  to  consider  the  items  of  the  budget  would 
have  no  data  available  for  their  information.  There  is  no 
question  that  there  should  be  a  budget  oflSicer,  who  would  be  at 
work  all  the  year  in  collecting  and  filing  data  relating  to  the 
budget.  Exact  information  is  essential  to  budget  making,  and 
without  a  permanent  budget  bureau,  with  a  budget  officer  at  the 
head,   such  information  is  impossible. 

"The  Jersey  law  should  also  provide  for  closer  cooperation 
between  the  committee  on  appropriations  and  those  who  have 
been  engaged  in  the  preparation  of  the  budget.  It  should  per- 
mit the  Governor,  at  his  request,  to  appear  before  the  commit- 
tee and  personally  defend  the  budget  recommendations:  it 
should  require  the  filing  of  records  of  the  proceedings  of  the 
Governor's  hearings  and  of  the  committee  on  appropriations  and 
should  give  the  committee  power  to  secure  all  data  it  may  re- 
quire from  the  budget  officer,  and  compel  his  presence,  if  re- 
quested  any   time. 


(28)     Letter  from  Senator  Arthur  Whitney,  December  20,  1921. 

101 


•'In '  d  "budgfet  which  is  of  the  executive  type,  every  effort 
should  be  made  to  fix  responsibility  upon  the  executive.  In  New 
Jersey,  the  committee  on  appropriations  may  alter  in  any 
respect  the  recommendations  of  the  budget,  and  when  it  re- 
ports out  the  annual  appropriation  bill,  the  Legislature  may 
amend  that  bill  in  any  manner  it  desires.  The  result  of  this 
is  unfortunate.  The  Governor  holds  hearings,  but  items  are 
frequently  not .  brought  forward  at  those  hearings  because  it 
is  felt  that  he  might  not  include  them,  or  might  cut  down  other 
items  in  the  same  department  in  order  to  include  them.  There 
is  always  the  thought  that  they  can  be  brought  before  the  com- 
mittee on  appropriations,  or,  failing  that,  pressure  can  be 
brought  upon  th«  legislature  to  add  them  to  the  appropriation 
bill. 

"Many  states  have  in  their  law  the  requirement  that  the  ap- 
propriation bill  shall  be  considered  before  any  other  items 
carrying  appropriation,  which,  from  one  point  of  view  is  very 
wise.  An  appropriations  committee  can  not  intelligently  ap- 
propriate the  state's  funds  when  bills  are  being  constantly  passed 
in  the  legislature  requiring  appropriations.  It  means  that  the 
work  of  the  committee  must  be  constantly  revised,  if  any  money 
at  all  is  to  be  left  in  the  state  treasury.  There  is,  however, 
one  difficulty  in  considering  the  appropriation  bill  before  other 
bills  carrying  appropriations;  it  means  a  succession  of  supple- 
mental appropriation  bills,  and  consequent  depletion  of  the  treas- 
ury. It  is  a  safer  plan  to  have  one  appropriation  bill  than  a 
number  of  bills,  and  that  is  the  intent  of  the  budget  act.  A 
step  towards  showing  clearly  the  responsibility  of  the  Governor, 
as  distinguished  from  that  of  the  Legislature,  would  be  to  re- 
quire the  Governor  to  introduce,  along  with  his  budget  and 
budget  message  (the  requirements  for  which  are  well  defined  in 
the  New  Jersey  statute),  a  Budget  Bill,  which  should  be  in- 
troduced in  the  legislature  on  the  opening  day  of  the  session 
and  be  referred  to  the  committee  on  appropriations.  The  items 
of  this  bill,  as  reported  by  the  committee,  should  constitute 
part  one  of  the  original  appropriation  bill,  changed  by  omis- 
sions, decreased  or  increased  as  the  committee  may  have  seen 
fit,  but  no  new  items  added;  all  new  items  should  be  in  part 
two  of  the  bill.  This  would  keep  all  appropriations  in  one 
bill,  yet  would  show  distinctly  what  new  items  had  been  added 
by  the  legislature,  either  in  committee  or  by  enacted  laws.  For 
New  Jersey,  this  would  be  a  desirable  change  in  the  statute. 

"A  difficulty  in  regard  to  fixing  responsibility  on  the  Governor 
is  the  fact  that  every  three  years  the  responsibility  is  shifted, 
because  an  out-going  Governor  prepares  the  budget  for  the  in- 

102 


coming  Governor.  The  effect  of  this  is  bad,  first  because  the  out- 
going  Governor  frequently  may  take  little  interest  in  a  budget 
which  he  is  to  leave  to  his  successor,  and,  secondly,  because  if 
the  in-coming  legislature  and  Governor  are  of  a  different  political 
faith,  they  have  little  regard  for  the  budget  recommendations  of 
the  out-going  Governor,  and  the  responsibility  is  too  divided 
for  the  people  easily  to  fix  it  where  it  belongs." 

Kansas 

The  Kansas  budget  act  resembling  that  of  New  Jersey  has 
not  been  effective  in  practice.  In  his  message  to  the  1921  leg-, 
islatiire  Governor  Allen  urged  consideration  of  a  budget  com- 
mission composed  of  the  governor,  auditor  and  budget  director, 
to  revise  departmental  estimates  not  in  a  most  artificial  fashion  as 
under  the  present  budget  law  but  with  investigatory  powers 
definitely  established  and  defined  by  statute.^^ 

In  explanation  of  the  budget  law's  failure  Governor  Allen's 
secretary  observes  :^^ 

"Our  budget  law  is  not  effective  for  the  reason  that  it  does 
not  provide  adequate  budgetary  machinery  for  making  examina- 
tions into  the  needs  of  the  various  state  institutions  and  depart- 
ments. Under  it  the  head  of  each  institution,  department  or 
board  makes  out  the  budget  for  hisi  department  and  submits  it 
to  the  governor.  The  governor,  under  a  scientific  budgetary 
system,  should  then  be  provided  with  sufficient  working  force  to 
go  into  the  merits  of  these  various  recommendations  for  the  pur- 
pose of  getting  data  for  his  own  recommendations  to  the  legis- 
Iture. 

"In  the  absence  of  this  machinery,  all  that  the  governor  can  do 
is  to  take  the  word  of  the  head  of  the  department  or  institution 
as  the  best  information  obtainable  as  to  its  needs.  ' 

"At  the  last  session  of  the  legislature  Governor  Allen  sub- 
mitted the  recommendations  of  all  the  departments  to  the  legis- 
lature without  change,  merely  saying  to  the  legislature  that  they 
should  give  sympathetic  attention  to  the  various  budgets  pre- 
pared. In  practice  the  Kansas  budget  law  has  not  caused  any 
different  attitude  toward  appropriations  than  prevailed  before 
the  passage  of  this  law." 

(29)  Message  of  Governor  H.  J.  Allen  to  Kansas  Legislature,  Janu- 
ary 11,  1921,  p.  2. 

(30)  Letter  from  E.  D.  George,  December  7,  1921. 

103 


And  the  secretary  of  the  Kansas  state  board  of  agriculture 
believes  the  state  budget  can  not  succeed  without  the  aid  of 
a  director  of  finance  or  similar  oificer  devoted  to  a  continuous 
study  of  the  needs  of  state  departments  and  institutions. ^^ 

On  the  whole,  budgetary  procedure  has  produced  no  marked 
advantages  in  the  miscellaneous  group  of  states  under  an  execu- 
tive budget.  « 

Arizona 

In  Arizona  the  former  executive  budget  secretary  asserts  :^^ 

"The  budget  submitted  to  the  Legislature  of  1921,  while  some- 
what amateurish,  gave  the  finance  committee  of  the  two  legis- 
lative houses  the  first  real  comparative  figures  which  they  had 
ever  had,  as  a  basis  for  appropriations. 

"Under  our  law  the  legislature  was  in  no  manner  bound  by 
the  recommendations  of  the  Governor  and  the  budget  was  purely 
advisory  in  its  function.  Unlike  the  executive  budget  where 
the  so-called  Maryland  Plan  prevails  the  recommendations  of 
the  Governor  could  be  increased  or  decreased  at  will,  and  the 
appropriation  bill  showed  on  final  passage  that  the  legislature 
had  made  full  use  of  its  privilege.  Under  such  a  law  as  we 
have  in  this  State  I  fail  to  see  any  benefit  derived  from  our  first 
attempt  at  making  the  appropriations  based  on  budget  system." 

Colorado 

According  to  the  budget  and  efficiency  commissioner  of 
Colorado,  ''The  operation  of  the  Colorado  Budget  Law  havS  not 
been  very  successful.  "^^  And  Governor  Shoup  in  his  mes- 
sage to  the  legislature  of  1921  said:^* 

"The  experience  of  the  budget  department  in  its  first  two  years 
strengthens  my  conviction  that  the  recommendations  o£  the  head 
of  that  department,  when  approved  by  the  Governor,  should 
have  more  fotce  and  effect  than  at  present.  When  changes  of 
administration  occur  the  budget  for  the  ensuing  biennial  period 


(31)  Letter  from  J.  C.  Mohler,  June  10,  1921. 

(32)  Letter  from  Ghas.  W.  Fairfield,  State  Auditor,  June  15,  1921. 

(33)  Letter  from  C.  A.  Lemmers,  June  15,  1921. 

(34)  Address  of  Gov.  O.  H.  Shoup  before  Joint  Session  of  the  23d 
General  Assembly  of  Colorado,  January  7,  1921,  p.  6. 

104 


should  be  prepared  by  the  outgoing  Executive.  It  is  not  to  be 
expected  that  a  newly-elected  Governor  will  have  sufficient  in- 
formation regarding  the  specific  needs  of  State  departments  and 
institutions  to  formulate  a  financial  plan  at  the  outset  of  his 
term." 


Iowa 

A  former  leader  of  the  Iowa  House  of  Representatives 
affirms  that  the  executive  budget  established  in  Iowa  in  1915 
has  been  almost  valueless. ^^  ''It  amounts  to  nothing  more 
than  a  grouping  of  the  askings  of  the  various  departments, 
and  lacks  all  the  essential  fundamentals  of  a  real  budget  system. 
I  think  no  budget  system  will  be  adequate  that  does  not  func- 
tion through  a  continuing  board  or  administrator. ' ' 

Governor  Kendall  of  Iowa  reviewing  the  budgets  submitted 
to  the  legislature  concludes  :^^ 

*'I  regret  exceedingly  to  say  that  the  recommendations  con- 
tained in  the  budget  have  not  been  accepted  as  the  basis  for  ap- 
propriations by  the  General  Assembly.  The  amounts  determined 
upon  by  the  legislative  committees  for  the  support  of  the  various 
activities  of  the  State  have  been  arrived  at  largely  by  sur- 
rendering to  the  demands  of  the  different  departments,  precisely 
as  was  done  before  the  budgetary  system  was  established." 

Minnesota 

Budget  practice  in  Minnesota  is  thus  characterized  by  the 
director  of  the  Bureau  of  Municipal  Research,  Minneapolis  Civic 
and  commerce  Association:^^ 

"Although  the  governor  is  given  legal  authority  and  apparent 
responsibility  for  the  budget,  he  is  given  no  funds  with  which 
to  provide  himself  with  a  staff  that  can  furnish  him  with  real 
information.  The  result  is  that  all  the  Governors  have  done  has 
been  to  transmit  to  the  Legislature,  in  printed  form,  the  de- 
partmental requests." 

(35)  Letter  from  J.  B.  Weaver,  Des  Moines,  July  7,  1921. 

(36)  Letter  from  Gov.  N.  B.  Kendall,  December  17,  1921. 

(37)  Letter  from  F.  L.  Olson,  June  9,  1921. 

105 


In  his  inaugural  message,  Governor  J.  A.  0.  Preus,  January  5, 
1921,  urged  the  establishment  of  a  permanent  budgetary  sec- 
retary appointed  by  the  governor,  subject  to  ratification  by  the 
house  and  senate.^^ 

New  Mexico 

The  Taxpayers'  Association  of  New  Mexico  is  dissatisfied 
with  the  state's  executive  budget  system  and  fostered  a  constitu- 
tional budget  amendment  in  1921  which  was  rejected  by  popu- 
lar vote.^^  Under  this  amendment  the  governor  would  as- 
sume office  one  month  earlier  and  the  legislature  would  con- 
vene somewhat  later  than  in  the  past,  allowing  the  governor  op- 
portunity to  study  the  needs  of  the  state.  A  budget  bill  would 
accompany  the  executive  estimates;  no  special  appropriations 
could  be  enacted  before  passage  of  the  general  appropriation  bill, 
except  upon  the  governor's  recommendation;  and  the  legisla- 
ture would  again  be  powerless  to  increase  appropriation  items 
other  than  those  for  the  Judicial  Department. 

Ohio 

Prior  to  the  establishment  of  a  department  of  finance, 
Ohio's  budget  estimates  were  submitted  to  the  governor,  re- 
viewed and  submitted  by  him  to  the  legislature.  In  practice 
the  estimates  were  prepared  by  a  budget  commissioner.  This 
procedure  has  been  critically  appraised  by  the  Ohio  Institute  for 
Public  Efficiency,  an  advocate  of  an  executive  budget  amendment 
to  the  state  constitution  :*^ 

"(1)  No  complete  program  of  work  or  financial  plan  Is  re- 
quired to  be  submitted  by  the  Governor  to  the  legislative  body. 
Estimates  of  expenditures,  with  few  written  explanations  are 
submitted  in  the  name  of  the  Governor.  Recommendations  for 
additional  income  needed   are  lacking. 


(38)  Inaugural  Message  of  Gov.  J.  A.  O.  Preus  to  the  Legislature 
of  Minnesota,  January  5,  1921,  p.  18. 

(39)  Letter  from  Director  of  Taxpayers'  Association  of  New  Mexico, 
Santa  Fe,  August  16,  1921. 

(40)  "A  State  Budget  System  for  Ohio,"  p.  4. 

106 


"(2)  Adequate  financial  reports  are  not  available  to  show  the 
financial  condition  of  the  state  at  different  times  or  the  cost 
of  expense  of  operation,  upkeep,  or  outlay  for  any  specified  period. 

"(3)  Accounts  are  not  kept  in  such  a  manner  as  to  distin- 
guish the  expense  of  operation  from  that  of  the  upkeep  of  prop- 
erty or  of  either  from  the  outlay  for  increasing  the  assets  of 
the  state. 

"(4)  The  estimates  of  expenditures  which  are  submitted  to 
the  legislature  are  not  digested  in  such  a  form  as  to  be  readily 
understood  by  the  members  of  the  legislature  or  by  the  citizens. 

"(5)  The  sessions  of  the  finance  committees  of  the  House 
and  Senate  to  which  the  budget  is  referred  are  usually  be- 
hind closed  doors.  There  is  little  or  no  chance  for  public  par- 
ticipation or  hearing. 

"(6)  A  considerable  waste  of  time  is  involved,  in  the  sepa- 
rate consideration  of  the  budget  by  separate  committees  of  the 
House  and  Senate.  A  joint  finance  committee  could  work  more 
effectively. 

"(7)  The  present  form  of  the  appropriation  bill  is  bulky 
and  unsummarized.  No  totals  appear.  It  is  safe  to  say  that 
few,  if  any,  members  of  either  house  know  how  much  money  they 
are  appropriating  when  they  vote  upon  the  appropriation  bill." 

Administrative  Budgets 

California 

The  recent  administrative  reorganziation  in  California  vir- 
tually regularizes  the  hitherto  informal  budget-making  func- 
tions of  the  state  board  of  control.  On  the  preparation  of  a 
budget  by  this  board  the  director  of  the  research  and  service 
department  of  the  Security  Trust  and  Savings  Bank  of  Los 
Angeles  comments  :^^ 

"While  this  budget  was  informal  and  in  no  way  legally  bind- 
ing upon  the  Legislature,  in  fact  it  was  absolute  both  in  its 
effect  upon  the  Legislature  and  upon  the  officers  of  the  state  ad- 
ministrative agencies.  This  was  so  on  account  of  the  fact  that 
the  Governor  politically  so  completely  dominated  the  members 
of  the  law-making  body  and  because  the  executive,  under  the 
California  Constitution  is  given  the  power  of  item-veto  over  ap- 
propriation bills.  Even  if  individual  appropriations  not  appear- 
ing in  the  so-called  budget  were  passed  by  the  Legislature,  they 

(41)     Letter  from  J.  R.  Douglas,  August  25,  1921. 

107 


could  be  eliminated  by  the  Governor  without  endangering  in  any 
way  the  support  of  the  general  executive  establishment. 

"While  no  actual  abuse  of  this  indirect  means  of  the  executive 
in  California  of  controlling  the  fiscal  policy  and  financial  pro- 
gram can  be  pointed  out,  the  scheme  tended  to  set  up  an  olig- 
archy in  the  State  Board  of  Control  and  to  cause  considerable 
friction  and  exasperation  among  the  heads  of  state  departments 
of  administration.  It  became  the  common  practice  of  the  Board 
of  Control  to  require  that  department  heads  should  pledge  them- 
selves in  advance  to  abide  by  the  Board's  action  upon  their  esti- 
mates and  to  refrain  from  seeking  independent  provision  of 
funds  from  the  Legislature.  If  such  guaranties  were  not  forth- 
coming, little  hope  could  be  expected  in  the  way  of  appropria- 
tions." 

In  the  state  election  of  1922  the  Commonwealth  Club  of 
California  will  initiate  and  submit  to  the  people  a  constitutional 
amendment  establishing  an  executive  budget  system,  permit- 
ing  the  legislature  to  increase  items  of  the  budget  bill,  but  pro- 
hibiting legislative  passage  of  special  appropriation  measures 
prior  to  adoption  of  the  budget  bill. 

Reviewing  California's  experience  with  an  informal  ad- 
ministrative budget  board,  the  director  of  the  California  Tax- 
payers' Association  believes  the  governor  should  be  personally 
responsible  for  the  budget,  entrusting  the  ministerial  work  of 
its  preparation  to  the  subordinate  agency  or  staff. "^^ 

Connecticut 

Comptroller  Harvey  P.  Bissell  of  Connecticut  thinks  that 
supervision  of  appropriations  by  the  state  board  of  finance  has 
many  immeasurable  advantages  over  former  haphazard  meth- 
ods.^2 

West  Virginia 

Relative  to  West  Virginia's  budget  board  the  treasurer  of 
the  state  board  of  control  remarks  :^^ 


(42)  Letter  from  W.  H.  Fisher,  Los  Angeles,  October  28,  1921. 

(43)  Letter    from    Assistant    Secretary,    Connecticut    Chamber    of 
CJommerce,  Hartford,  June  24,  1921. 

(44)  Letter  from  J.  W.  Barnes,  July  18,  1921. 


108 


"This  is  the  second  year  the  budget  commission  has  functioned, 
and  all  are  agreed  that  it  is  a  great  improvement  over  the  old 
method  of  log-rolling  that  obtained. 

"The  legislative  committees  are  very  careful  and  all  items 
must  pass  their  minute  inspection. 

"Under  the  present  system  the  heads  of  the  various  state  de- 
partments pass  on  their  own  budget  and  in  this  way,  of  course, 
some  of  the  desirable  things  to  be  obtained  are  lost. 

"The  arrangement  of  the  Federal  government  providing  the 
special  budget  commission  in  which  no  one  is  pecuniarily  in- 
terested in  the  appropriations  meets  this  objection." 

From  a  member  of  the  West  Virginia  Senate  there  comes 
the  following  criticism  of  the  state 's  budget  system  i'*^ 

"Under  our  budget  system  the  Board  of  Public  Works  made 
up  of  the  State  Officers  compose  the  budget  commission.  They 
make  up  the  estimates  and  submit  a  bill  to  the  Legislature  and 
the  Legislature  cannot  increase  the  estimates  but  may  make 
reductions.  The  system  is  not  working  satisfactorily  and  there 
was  a  strong  sentiment  at  the  last  session  to  repeal  it,  and  if 
it  was  not  a  part  of  the  Constitution  it  would  have  been  re- 
pealed. 

"In  practice  each  department  is  inclined  to  pad  its  estimates 
and  then  secure  its  adoption  by  helping  others  get  their  padded 
estimates.  It  is  my  judgment  that  a  successful  budget  .system 
must  be  in  control  of  the  Governor  or  of  a  Board  that  is  not 
interested  in  any  of  the  expenditures  of  public  money." 

Montana 

The  latest  Montana  budget  contained  no  recommendations, 
because  two  of  the  three  members  of  the  budget-making  author- 
ity (the  State  Board  of  Examiners)  were  retiring  from  office 
early  in  1921.46 

Tennessee 

There  has  been  a  very  good  budget  law  on  the  statute  books 
of  Tennessee  since  1917,  but  no  budget  has  yet  been  submitted 
to  the  legislature  in  compliance  with  its  provisions.^" 

(45)  Letter  from  Senator  Harvey  W.  Harmer,  Clarksburg,  June  18, 
1921. 

(46)  Buck,  "State  Budget  Progress,"  571. 

(47)  Ibid. 

109 


Michigan 

Under  the  heading,  "Why  Michigan's  Budget  Failed/' 
the  Committee  to  Promote  Reorganization  of  Michigan's  State 
Government  reported  in  1920  on  the  work  of  the  budget  com- 
mission  recently  superseded  ;^^ 

"Intelligent  consideration  of  budget  requests  under  the  pres- 
ent system  is  practically  impossible.  Responsibility  for  fram- 
ing the  budget  is  divided.  The  essential  information  is  lacking. 
There  is  no  one  between  budget  periods  who  is  directly  charged 
with  the  •  responsibility  for  studying  the  work  and  problems 
of  the  various  institutions  and  state  departments  to  determine 
the  conditions  under  which  they  operate,  the  character  and 
quality  of  the  services  they  render,  and  to  estimate  the  cost  of 
doing  the  work  or  giving  the  service  for  which  they  are  respon- 
sible. 

"Furthermore,  so  long  as  a  budget  is  looked  upon  as  a  finan- 
cial program  rather  than  a  program  of  work  and  service  to  be 
rendered,  intelligent  control  of  appropriations  is  impossible.  Every 
budget  request  should  show  costs  in  terms  of  services  it  is  pro- 
posed to  render  to  the  state,  rather  than  costs  of  supplies,  ma- 
terial, equipment,  etc. 

"Intelligent  and  effective  budget  procedure  requires  that  in- 
formation be  made  available  which  enables  the  appropriating 
body  to  determine  what  services  are  most  vital  and  essential 
to  the  state,  and  when  a  request  for  funds  is  refused,  exactly 
what  services  are  made  impossible." 


This  committee  urges  provision  for  a  single  budget  com- 
missioner, appointed  by  and  directly  responsible  to  the  gov- 
ernor, who  shall  be  charged  with  the  duty  of  securing  for  the 
governor  information  regarding  the  work  being  done  by  the 
various  departments  responsible  to  him.  The  budget  commis- 
sioner should  be  furnished  the  means  for  studying  conditions 
and  needs  of  the  various  state  departments  and  institutions  to 
secure  the  information  essential  to  intelligent  consideration  of 
budget  requests  made  by  them. 


(48)     Summary  of  Report  on  the  Analysis  of  Michigan's  State  Gov- 
ernment, January  1921,  pp.  11-12,  15-16. 

110 


Administrative-Legislative  Budgets 

Wisconsin 

In  1919  Governor  Pliilipp  of  Wisconsin  lauded  the  state's 
budget  system  in  an  address  to  the  National  Conference  of 
State  Purchasing  Agents  of  the  United  States,  at  Madison. 
Particular  advantages  of  Wisconsin's  budgetary  procedure  cited 
were;^^ 

"In  the  first  place  a  uniform  system  of  accounting  has  been 
adopted  by  the  state.  Departments  are  required  to  keep  their 
records  under  the  same  classifications  as  are  used  in  the  bud- 
get. In  this  way  their  records  show  whether  they  are  expend- 
ing their  appropriations  for  the  purposes  authorized  by  the 
legislature. 

"Not  only  are  departments  required  to  keep  records  of  their 
expenditures  but  they  are  likewise  required  to  furnish  monthly 
reports  to  the  office  of  the  State  Board  of  Public  Affairs.  These 
monthly  reports  consist  of  classified  statements  of  the  expen- 
ditures, copies  of  the  pay  rolls,  detailed  statements  of  traveling 
expense  vouchers  and  any  other  bills  which  may  have  been  in-' 
curred.  These  reports  are  checked,  examined  and  entered  on 
an  appropriation  record  kept  in  the  office  of  the  State  Board  of 
■  Public  Affairs,  so  that  the  Board  constantly  knows  for  what 
purposes  the  funds  are  being  expended  and  whether  the  legis- 
lative intent  is  being  complied  with. 

"The   State   Board    of    Public    Affairs    is  required    by   law   to 

conduct  the  annual   audits   for   all   departments.     These   audits 

afford   another   check   upon   the  purposes   for   which   the   funds 

have  been  expended  and  enable  the  board  to  maintain  a  close 

scrutiny  upon  the  fiscal  affairs  of  all  departments  and  activities. 

"The  adoption  ^f  the  budget   system  has  made   it   necessary 

for  all  financial  affairs  of  the  state  to  be  conducted  in  a  manner 

which  is  open  and  above  board.     It  no  longer  is  possible  for  a 

department   to   get   two   or   three  appropriations   for   the   same 

purpose.     The  purpose  must  be  legitimate,  for  all  Requests  are 

now  scrutinized  so  carefully  and  publicity  given  that  it  is  next 

to  impossible  to  slip  any  appropriations  through  which  should 

not  be  passed. 

"The  budget  system  has  resulted  in  the  elimination  of  a  large 


(49)  Budget  and  Budget  Making,  Address  by  Gov.  E.  L.  Philipp  of 
Wisconsin,  at  National  Conference  of  State  Purchasing  Agents  of  the 
United   States,   Madison,  August   27-28,   1919. 

Ill 


number  of  personal  measures.  Members  of  the  Legislature  are 
no  longer  interested  in  espousing  the  cause  of  this  or  that  per- 
son in  state  sei'vice. 

"Departments  themselves,  as  a  rule,  no  longer  initiate  appro- 
priation measures  nor  concern  themselves  about  the  passage  of 
the  appropriation  measures.  In  this  way  the  lobbying  which 
department  heads  and  even  employes  formerly  indulged  in  has 
been  eliminated. 

"Under  the  budget  system  a  department  must  pay  for  every- 
thing it  receives  out  of  its  appropriation.  The  result  is  that 
today  department  heads  are  taking  pains  to  see  where  the  post- 
age goes,  are  watching  to  see  what  kind  of  materials  are  used 
by  their  employes,  are  trying  to  reduce  the  number  of  printed 
volumes  to  the  number  actually  required,  in  fact,  are  exerting 
every  precaution  to  conserve  their  appropriation,  for  under  the 
law  there  is  a  penalty  for  the  exceeding  of  an  appropriation  or 
the  creation  of  any  indebtedness  in  excess  of  existing  appropria- 
tions. 

"The  budget  system  tends  to  fix  responsibility  for  the  handling 
of  public  funds  upon  certain  specific  boards  and  officers. 
Through  this  fixing  of  responsibility  greater  economy  and  effici- 
ency has  resulted  in  the  affairs  of  state." 

Governor  Blaine,  in  March  1921,  sent  a  special  financial 
message  to  the  Wisconsin  Legislature  in  which  he  criticised  the 
existing  administrative-legislative  budget  system  :^^ 

"The  deficits  according  to  the  budget  estimates  as  corrected 
and  the  emergency  appropriations  made  amount  in  the  aggre- 
gate to  over  $1,400,000.  From  a  review  of  the  emergency  ap- 
propriations made  and  the  deficits  created,  .  .  .  grave  doubt 
well  may  exist  in  the  minds  of  public  men  as  to  the  efficiency 
and  desirability  of  continuing  a  budget  system  along  the  lines 
provided  in  this  state. 

"The  tendency  of  our  present  system  is  to  exceed  appropria- 
tions, rather  than  to  keep  within  them." 

The  director  of  the  Citizens'  Bureau  of  Milwaukee  makes 
this  observation  on  the  Wisconsin  budget  :^^ 

"The  present  year  developed  a  number  of  weaknesses  in  the 
legislative  budget   system.     There  was  quite  a  furore  over  the 

(50)     Message  of  Gov.  J.  J.  Blaine  to  Wisconsin  Legislature,  March 
1,  1921,  pp.  10-11. 

(ol)     Letter  from  H.  L.  Henderson,  September  2,  1921. 

112 


adoption  of  the  state-wide  wheel  tax.  The  question  arose  whether 
the  money  was  necessary  and  this  need  introduced  the  discus- 
sion oL  the  budget.  Being  a  legislative  budget,  the  administra- 
tion did  not  know  and  could  not  present  a  complete  statement  as 
to  the  needs  of  the  various  departments.  The  responsibility 
could  not  be  located,  and  the  entire  situation  thoroughly  con- 
vinced us  that  a  legislative  budget  was  not  as  effective  as  an 
executive  budget." 

North  Dakota 

A  former  member  of  the  North  Dakota  legislature  sees  a 
decided  advantage  in  the  state's  present  budget  system -.^^ 

"It  is  a  decided  improvement  upon  the  old  system.  Prior  to 
the  budget  law,  nothing  was  done  toward  ascertaining  the  needs 
of  the  various  state  institutions  until  the  legislative  assembly 
met  and  then  it  seemed  to  be  a  hit  and  miss  proposition  with 
reference  to  appropriations. 

"The  budget  board  is  in  a  position  to  go  carefully  over  all 
requests  and  to  take  into  consideration  the  general  running  ex- 
penses of  the  state,  etc.,  and  to  make  suggestions  with  refer- 
ence to  the  immediate  appropriations  and  the  proper  tax  levy. 

"During  the  session  of  the  legislature,  in  which  I  had  the 
honor  to  sit,  there  was  no  report  issued  more  in  demand  than 
the  report  of  the  budget  board." 

South  Dakota 

The  secretary  of  the  Sioux  Palls,  South  J3akota,  Chamber 
of  Commerce  claims  the  state's  budget  system  is  a  biLsiness-like 
way  of  administering  public  funds  and  sees  no  prospect  of  its 
abandonment.^^ 

Similarly,  the  chairman  of  the  South  Dakota  tax  commis- 
sion finds  that  the  budget  board  has  functioned  advantageously 
in  the  interests  of  the  state,  during  the  few  years  of  its  existence. 
He  reports  little  or  no  legislative  change  in  the  budget  board's 
recommendations,  except  in  the  case  of  some  minor  details.    And 

(52)  Letter  from  Attorney  J.  F.  O'Connor,  Grand  Forks,  June  11, 
1921. 

(53)  Letter    from   Sec'y.    Charles   McCaffree,    .Tune    23,    1921. 

113 


he  finds  the  board  committed  to  an  efficiency  survey  of  state 
administration  and  the  institution  of  central  purchasing  for 
all  state  departments.^^ 

Maine 

In  Maine  the  sfeite  budget  board  during  the  last  legislative 
session  accomplished  an  approximate  saving  of  10  per  cent  in 
expenditures  for  the  last  two  years  and  accounted  also  for  a 
substantial  part  of  the  reduction  in  the  state  tax  rate  by  over 
4  per  cent,  according  to  the  secretary  of  the  Portland  Chamber 
of  Commerce.^^ 

Georgia 

Georgia  has  no  budget  system  in  the  opinion  of  the  state 
comptroller-general.  The  executive  secretary  to  the  governor 
of  Georgia  write  :^® 

"The  powers  of  this  (budget)  commission  were  so  limited 
by  the  bill  creating  it  that  the  state  has  benefited  very  little  by 
the  work  of  the  commission,  other  than  to  furnish  the  various 
legislative  committees  information  necessary  for  them  to  have 
before  passing  appropriations  for  the  departments  and  institu- 
tions." 

In  fact  the  Georgia  budget  commission  recognizes  its  handicaps 
and  has  repeatedly  recommended  a  constitutional  amendment  in- 
creasing its  powers  bj^  prohibiting  legislative  increase  of  budget 
recommendations,  except  by  a  two-thirds  vote  of  the  legislature's 
membership.^'' 

Neiv  York 

While  New  York  has  just  superimposed  a  board  of  estimate 
and  control  upon  its  legislative  budget  system,  legislative  com- 

(54)  statement  of  Chairman  H.  L,  Eveland,  September,  1921. 

(55)  Letter  from  E.  H.  McDonald,  June  4,  1921. 

(56)  Letter   from    Comptroller-general,    December    12,    1921;    letter 
from  Atlanta   Chamber  of  Commerce,   June   23,   1921. 

(57)  Report  of  Georgia  Budget  and  Investigating  Commission,  1919, 
p.   171. 

114 


mittee  dominance  of  state  finance  remains  untouched.     There- 
fore, certain  drastic  criticisms  of  New  York's  legislative  budget 
system    by    the    New    York    IState    Reconstruction    Commission 
(1919)  are  here  reproduced  :^^ 

"One  of  the  most  serious  defects  in  the  present  law  is  that 
it  completely  destroys  responsibility  of  the  Governor  for  as- 
sembling and  reviewing  the  estimates  of  expenditures  for  several 
departments  of  the  state   government. 

"Since  the  passage  of  the  Sage-Maier  bill  (establishing  the 
legislative  budget,  1913)  there  has  been  a  notorious  lack  of  co- 
operation between  the  Governor  and  the  Legislature  on  financial 
matters. 

"The  law  has  not  and  can  not  produce  a  genuine  Dudget. 
Such  a  document  must  be  prepared  by  officers  who  know  the 
conditions  of  the  administration  for  which  provisions;  are  to  be 
made.  It  must  present  a  complete  program  of  work  reduced  to 
a  business  basis,  carefully  reviewed  by  a  responsible  executive 
officer,  and  guaranteed  to  be  an  economical  program;  not  a 
collection  of  padded  demands  upon  the  treasury  made  by  officers 
who  are  forced  to  ask  more  than  they  hope  to  get  in  order  to 
secure  approximately  enought  to   meet  their  bills. 

"The  law  places  no  limitation  upon  the  introduction  and  pas- 
sage by  the  Legislature  of  numerous  special  appropriation  bills. 
It  has  been  the  practice  of  the  Legislature  to  put  through  a 
large  number  of  such  bills  during  the  closing  days  of  the  ses- 
sion. As  indicated  above  the  Legislature  of  1919  passed  83 
special  appropriation  bills  during  the  last  ten  days  of  the  ses- 
sion. The  total  of  the  budget  for  1919-1920  could  not  be  ascer- 
tained until  a  month  after  the  Legislature  had  adjourned  when 
the  Governor  had  finally  acted  upon  all  these  bills.  Such  pro- 
cedure not  only  encourages  'log-rolling'  and  the  passage  of 
'pork  barrel'  measures,  but  it  makes  impos3i!)le  any  compre- 
hensive budget  plan. 

"The  legislative  treatment  of  appropriation  measures  is  per- 
functory and  uncritical.  In  fact,  the  Legislature  has  surrended 
Its  functions  so  far  as  the  main  appropriation  bill  is  concerned 
.into  the  hands  of  the  Senate  Finance  Committee.  The  opposi- 
tion party's  discussion  of  appropriation  measures  is  casual  and 
futile." 

The  Reconstruction  Commission  and  the  New  York  State 
Association  have  proposed  an  executive  budget  amendment  to 


(58)     New  York  Reconstruction  Commission's  Report,   315-31 G. 

115 


the  state  constitution,  embodying  the  Marjdand  restriction  on 
legislative  increase  of  items  in  the  budget  bill,  along  the  lines 
recommended  by  the  New  York  constitutional  convention  in 
1915. 

Legislative  Budget  Systems 

Comptroller  Sims  of  Arkansas  and  the  manager  of  the 
Little  Rock  Board  of  Commerce  are  authorities  for  the  state- 
ment that  the  state's  legislative  budget  system  creates  no  ef- 
fective control  over  appropriations.^^ 

A  preceding  chapter  has  sketched  appropriation  methods  in 
Pennsylvania  where  legislative  committees  are  responsible  for 
the  state 's  financial  and  work  program. 

Summary  of  Operating  Re  stilts 

It  is  impossible  to  pass  final  judgment  upon  the  operation 
of  state  budget  systems,  owing  to  their  relative  newness  and 
the  scant  information  available  upon  budgetary  progress  in 
some  of  the  thirty  states  just  considered.  However,  their  ex- 
perience justifies  tentative  observations  upon  budgetary  theory 
and  practice,  both  of  which  are  still  in  the  evolutionary  or  ex- 
perimental stage. 

The  estimates  of  budgetary  results  quoted  at  the  begmning 
of  this  chapter  complement  rather  than  contradict  each  other. 
It  is  true  that  in  a  majority  of  the  states  the  budget  system  has 
not  materially  improved  the  financial  planning  and  control  ex- 
isting before  its  establishment.  But  under  most  favorable  con- 
ditions budgetary  procedure  has  shown  the  benefits  outlined 
by  the  Massachusetts  Commission  in  1918.  And  these  are  worth 
striving  for  by  the  tax  payers  of  every  state  in  the  Union. 

To  recapitulate  the  demonstrated  advantages  of  a  workable 
state  budget  system : 

(1)  It  creates  constructive  financial  leadership,  thus  intro- 
ducing responsibility  and  order  into  the  "buck  passing"  and 
chaos  of  state  finances. 

(59)     Letter    from    State    Comptroller,    September    12,    1921;    letter 
from  Secretary  George  Firmin,  June  12,   1921. 

116 


(2)  It  affords  the  governor  and  legislature  complete  and 
comparative  data  on  state  finances,  facilitating  a  careful  bal- 
ancing of  state  expenditures  against  each  other  and  available 
income. 

(3)  It^  visualizes  and  popularizes  state  finances,  enabling 
the  citizen  to  take  intelligent  interest  in  the  appropriation  and 
expenditure  of  his  taxes. 

(4)  It  reduces  "log-rolling"  and  enforces  consideration  of 
the  state's  needs  as  a  whole. 

(5>  It  stimulates  administrative  reorganization  and  gradual 
tightening  of  administrative  methods. 

(6)  It   leads   to    improved   accounting   practices. 

(7)  Through  (5)  and  (6)  it  makes  possible  greater  control 
over  and  responsibility  for  departmental  expenditures. 

(8)  It  tends  to  keep  down  deficiencies,  check  expenditures, 
and  make  the  state  live  within  its   income. 

From  the  budget  experience  of  these  thirty  states  it  further 
appears  that : 

(1)  A  constitutional  budget  amendment  is  desirable  to  give 
the  budget  system  greater  prestige  and  stability  and  to  correct 
certain  structural  defects  in  state  government  that  militate 
against  real   financial  planning  and  control. 

(2)  Reorganization  of  state  administration  to  fix  and  cen- 
tralize responsibility,  eliminate  useless  and  duplicate  functions 
and  introduce  approved  business  methods,  is  essential  to  most 
effective  functioning  of  the  budget  system. 

(3)  In  practice  the  executive  budget  system  shows  the  most 
immediate  and  substantial  results. 

(4)  No  budget  system  can  fully  succeed  without  a  permanent 
agency  for  continuous  study  and  collection  of  budget  informa- 
tion, as  well  as  current  operation  analyses  of  state  adminis- 
tration. 

(5)  The  budget-making  authority  should  submit  a  bill  or 
bills  covering  all  appropriations  and,  if  necessary,  revenue  bills 
to  meet   the  expenditures   proposed. 

(6)  Complete  legislative  cooperation  with  the  budget-making 
authority  is  a  prerequisite  to  real  budgetary  control.  This  in- 
volves : 

(a)  Revision  of  legislative  procedure  to  insure  joint  con- 
sideration of   the   budget  by   the  finance  committees. 

(b)  Some  plan  whereby  the  budget  bill  or  bills  can  be 
given  a  preferred  legislative  status.  Budget  appropriations 
should  have  precedence  over  special  appropriations,  thus  keep- 

117 


ing  the  former  in  the  limelight,  using  them  as  a  measure  of 
supplementary  and  total  expenditures,  and  insuring  early 
and  deliberate  action  upon  the  budget  authority's  recommenda- 
tions. 

(c)  Where  the  governor  has  full  power  to  reject  or  reduce 
items  of  appropriation  bills,  no  restriction  upon  the  legisla- 
ture's right  to  increase  the  budget  recommendations  seems 
necessary.        • 

(7)  The  incoming  governor  must  have  access  to  the  informa- 
tion used  by  his  predecessor  in  preparing  a  budget  for-  submis- 
sion to  the  legislature;  and,  if  desired,  the  incoming  governor 
should  be  permitted  to  supplement  the  budget  so  submitted. 


118 


APPENDIX  ' 

References  to  State  Budget  Laivs  ^ncl  Atnendments      .    ■ 

Alabama,  S.  L.  1919,  nos.  31  and  130.  -. 

Arizona,  S.  L.  1919,  c.  61. 

Arkansas,  S.  L.  1913,  c.  44 

California,  S.  L.  1911,  c.  349,  amended  by  S.  L.  1921,  ,S.  B.  no. 
879. 

Colorado,  S.  L.  1919,  c.  12. 

Connecticut,  S.  L.  1915,  c.  302,  amended  by  S.  L.  1919,  c.  290 
and  c.  291. 

Delaware,  S.  L.  1921,  c.  26 

Florida,  S.  L.  1921,  H.  B.  no.  69. 

Georgia,  S.  L.  1918,  no.  327,  p.  155. 

Idaho,  S.  L.  1919,  c.  135,  amended  by  S.  L.  1921,  S.  B.  no,  326. 

Illinois,  S.  L.  1917,  Civil  Administrative  Code,  p.  2. 

Indiana,  S.  L.  1921,  S.  B.  no.  197. 

Iowa,  S.  L.  1915,  code  sees.  191a — 191b. 

Kansas,  S.  L.  1917,  c.  312. 

Kentucky,  S.  L.  1918,  c.  12. 

Louisiana,  S.  L.  1916,  no.  140, 

Maine,  S.  L.  1919,  c.  102. 

Maryland,  amendment,  art.  Ill,  sec.  52  of  Constitution,  1916. 

Massachusetts,  amendment,  no.  16,  Constitution,  19i8,  supple- 
mented by  S.  L.  1918,  c.  244  and  S.  L.  1919,  c.  52. 

Michigan,*  S.  L.  1919,  no.  98,  amended  by  S.  L.  1921,  no.  2. 

Minnesota,  S.  L.  1915,  c.  356. 

Mississippi,  S.  L.  1918,  c.  225. 

Missouri,  S.  L.  1921,  p.  171  (subject  to  referendum,  1922). 

Montana,  S.  L.  1919,  c.  205,  amended  by  S.  L.  1921,  H.  B.  no. 
194. 

Nebraska,  S.  L.  1921,  H.  R.  no.  492,  repealing  S.  L.  1915,  c.  229 
and  S.  L.  1919,  c.  190,  Title  II,  art.  2. 

Nevada,  S.  L.  1921,  c.  60,  repealing  S.  L.  1919,  c.  45. 

New  Hampshire,  S.  L.  1919,  c.  153. 

New  Jersey,  S.  L.  1916,  c.  15. 

New  Mexico,  S.  L.  1919,  c.  174,  repealing  S.  L.  1917,  c.  81  and 
c.  114. 

119 


New  York,  S.  L.  1916,  e.  130  (Leg.  Law,  sees.  26—32),  amended 

by  S.  L.  1921,  c.  336. 
North  Carolina,  S.  L.  1919,  c.  38,  amended  by  Ex.  Sens.  L.  1920, 

c.  38,  and  S.  L.  1921,  c.  2. 
North  Dakota,  S.  L.  1915,  c.  61. 

Ohio,  S.  L.  1921,  11.  B.  249,  repealing  S.  L.  1913,  S.  B.  no.  127. 
Oklahoma,  S.  L.  191^,  c.  142. 

Oregon,  S.  L.  1921,  c.  22,  repealing  S.  L.  1913,  c.  284. 
South  Carolina,  S.  L.  1919,  no.  130. 
South  Dakota,  S.  L.  1917,  c.  354,  amended  by  S.  L.  1919,  c.  319, 

and  by  S.  L.  1921,  c.  374. 
Tennessee,  S.  L.  1917,  c.  139. 
Texas,  S.  L.  1919,  c.  167. 

Utah,  S.  L.  1917,  c.  15,  amended  by  S.  L.  1921,  c.  127. 
Vermont,  S.  L.  1915,  no.  26,  amended  by  S.  L.  1917,  no.  32  and 

S.  L.  1919,  no.  22. 
Virginia,  S.  L.  1918,  c.  64,  amended  by  S.  L.  1922,  H.  B.  no.  158. 
Washington,  S.  L.  1915,  c.  126,  amended  by  S.  L.  1921,  c.  7, 

Adm. .  Code,  sec.  6. 
West  Virginia,  amend,  art.  VI,  sec.  51  of  Constitution,  1918. 
Wisconsin.  S.  L.  1913,  c.  728,  amended  by  S.  L.  1915,  c.  606, 

and  S.  L.  1917,  c.  2  and  c.  300. 
Wyoming,  S.  L.  1919,  c.  10. 


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